News
10 March 2016
Does your business need a credit control team?
(Source - theguardian)
Late payments can seriously affect cashflow for SMEs. Tim Aldred looks at how they should deal with the problem
Late payers can seriously affect a company's cashflow and throw its future into jeopardy. If that's you and you're unsure of the law, too embarassed to make a demanding phone call or getting caught
out too many times, you need a credit control process.
Research conducted by the Forum of Private Business found that late payment is a major problem for a lot of businesses, but can be eased by putting credit control facilities in place.
The research on payment culture found that 44% of businesses have strict credit control facilities, and were much less likely to have a serious issue with late payment than the 16% with informal set-ups. So credit control teams clearly work. But what is it they actually do, and how do you go about implementing one?
A credit control team's job begins before a sale is even made. They ensure that your company has effective and up-to-date terms and conditions that can be supplied to a client, as well as a suitable
credit limit application form, so you can capture all of the important details about any new client right at the start of a business relationship. Adam Home, collections and partnerships manager at
cashflow specialists Safe Collections, explains: "Your credit control team should thoroughly vet any potential customer to ensure they have both the financial means to pay and also that they are
prepared to pay promptly."
If the customer has a clean credit history and looks to be a prompt payer then your credit control team will make a decision on the level of credit provided and suitable payment terms. After a sale is made, your credit control team will contact the customer before the due date to ensure they're happy and to confirm that payment will be made within the agreed terms. If the customer misses the deadline, the team is then responsible for keeping contact and recovering the funds as soon as possible.
Home adds: "Credit control should never be subservient to sales, especially if your company provides commission or other incentives. The credit control team should have the power to suspend service or cease delivery of goods while money remains outstanding. After all, it is no use having a full order book if those orders are never paid for."
Finally, the credit control team needs to regularly review the status of existing customers in order to minimise risk. Business circumstances change regularly and just because a company has historically been a good payer, it doesn't mean that their financial position can't change.
Sometimes it is necessary to go beyond the credit control team to chase a collection. Home says: "Escalate an unpaid account to a senior decision maker, such as the managing director, prior to taking further action like placing the account with a debt collector or issuing proceedings.
"It draws a clear line in the sand to tell your customer that further extensions to payment terms will not be forthcoming. If the boss can't get the client to see the importance of making a payment, then chances are no one can and you can then look at your further options."
Home says that proficiency at the job takes a specific kind of individual: "A good credit controller needs to have excellent customer service skills coupled with a methodical approach, confident manner and a solid understanding of the business.
"Many customers may take their cue from you in regard to payment. If your company takes a relaxed attitude to account collection don't be surprised if your customers pay you late – or not at all. Taking a serious approach demonstrates that your company takes credit control seriously and discourages late payment."
A confident manner is essential – they need to be able to let customers know that payment within the agreed terms is important to the company and the relationship. This also means feeling no embarrassment or guilt in calling and asking for payment.
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Some customers may try to secure last-minute discounts in return for immediate payment or try and arbitrarily extend payment terms, so your credit controller needs to have the confidence to stand their ground and secure full, timely payment. In many cases, companies find that they already have the necessary skillset internally.
Home asks: "Could you task an existing staff member as your dedicated credit controller? If you do already have the skills in house, can you ensure that they have the time to dedicate themselves to credit control in addition to their core duties?
"Even micro-businesses can find these skills. If you're a freelancer could your husband, wife or friend dedicate themselves a few hours a week? Freelancers especially can find that removing themselves from the credit control function makes collections easier, as you aren't then playing both the good and bad cop roles."
If you are looking to hire a dedicated credit control professional, look for personnel with a proven history in credit control, preferably within your industry or similar.
Home says: "Ideally, previous experience should mirror your own client base, so if you deal purely with other businesses then any potential employee should have experience of B2B accounts and a solid understanding of UK late-payment legislation.
"Consumer accounts require a different approach and the law that governs consumer credit is very specific, so hiring staff with a pre-existing understanding of the rules and regulations can be a boon. You may also want to stipulate that this person has a credit qualification from the Institute of Credit Management as this ensures they have more than a basic understanding of the disciplines required."
The key thing for any small business, Home says, is to make sure they have the right amount of cover. "If your credit control only takes an hour or two every day, then hiring an experienced credit manager is likely to be completely disproportionate to your needs."
27 January 2016
Tesco delayed payments to suppliers to boost profits
Tesco delayed payments to suppliers to boost profits, watchdog finds - Groceries code adjudicator finds supermarket failed to pay back multi-million pound sums owed for up to two years, but regulator is unable to levy fine
The grocery market watchdog has ordered Tesco to make “significant changes” in the way it deals with suppliers after finding the supermarket had deliberately delayed payments to boost its
profits.
Christine Tacon, the groceries code adjudicator (GCA), said Tesco had seriously breached the legally binding code governing the grocery market. She said some suppliers had to wait two years for millions of pounds owed by the grocer.
At last the groceries code adjudicator has found evidence that the country’s biggest supermarket is short-changing its suppliers. However, Tacon is unable to fine the supermarket as the breaches
took place before her power to levy fines came into force in April last year. “I was troubled to see Tesco at times prioritising its own finances over treating suppliers fairly,” Tacon said. She
added that she had seen internal emails suggesting payments should not be made ahead of a certain date in order to avoid missing targets promised to City investors. In some cases this occurred
despite suppliers’ requests for payment, at other times it was with their consent.
“The pressure on buyers and finance teams to meet margin targets was the overriding pressure within the business. It was widespread. It was everywhere,” she said. Tacon also criticised the company for unilaterally making deductions from invoice payments. Even when Tesco acknowledged a debt, Tacon said that on some occasions the money was not repaid for more than a year, or as long as two years.
The adjudicator launched the investigation in February last year after Tesco admitted it had overstated profits in a scandal that has also led to a Serious Fraud Office investigation.
Dave Lewis, Tesco chief executive, who joined the business in September 2014 just a few days before the accounting scandal emerged and was in post for only four months of the period investigated by Tacon, apologised to suppliers and said the retailer had now “fundamentally changed”.
“Over the last year we have worked hard to make Tesco a very different company from the one described in the GCA report. The absolute focus on operating margin [under former boss Phil Clarke] had damaging consequences for the business and our relationship with suppliers,” he said.
Tacon said Tesco had “acted unreasonably” by delaying payments to suppliers, often for lengthy periods and sometimes deliberately to support its profits ahead of key financial reporting periods. For example, a list of methods for meeting a half-year profit target seen by Tacon included “not paying back money owed”. She considered Tesco’s breach of the code to be serious because of the varied and widespread nature of the delays in payment.
“The most shocking thing I found was how widespread it was. Every supplier I spoke to had evidence of delays in payments,” Tacon said.One supplier was owed several million pounds as a result of price changes being incorrectly applied over a long period, but Tesco took two years to refund the money.
“The sums were often significant and the length of time taken to repay them was too long,” she said at the launch of her 60-plus page report.
While in some cases the delays were due to deliberate policy, Tacon found buyers were given “contradictory and unclear” guidance about the importance of hitting margin targets. Some delays were the result of poor administration and communication and Tesco had “inadequate processes” for correcting errors, for example where data had been input wrongly.
Tesco shareholders could sue for 'millions lost' after it overstated profits
She has given the retailer a month to say how it plans to implement her recommendations, which include paying suppliers in accordance with agreed terms, correcting pricing errors within a week of
notification by a supplier, and calling a halt to unilateral deductions from invoices. Suppliers will now have 30 days to challenge any proposed deduction.
The adjudicator also said Tesco must improve its invoices, making them clearer and more transparent for suppliers, and train its finance teams and buyers. She said many of the problems encountered related to unclear terms in Tesco’s agreements with suppliers and deals not being put into writing – something she has referred to the competition watchdog, the CMA. Tacon said many suppliers had reported an improvement in relations with Tesco since the period under investigation, June 2013 until February 2015. She said she had found no evidence that Tesco had required suppliers to make payments to secure better shelf positioning or to increase the amount of space allocated to them on shelves.
However, she will now launch an industry-wide consultation examining payments made by suppliers in order to participate when Tesco reviewed the range of products stocked in a particular category or in order to be made a “category captain”, where they could advise on how best to display products. Tesco also asked for “investment” from suppliers to help underpin profits in a particular category. Tacon said such payments could amount to tens or even hundreds of thousands of pounds per supplier.
Tacon said: “There were a range of practices that I am concerned could amount to an indirect requirement for payment [related to positioning of products on shelves], contravening the code.”
Lewis said: “In 2014 we undertook our own review into certain historic practices, which were both unsustainable and harmful to our suppliers. We shared these practices with the adjudicator, and publicly apologised. Today, I would like to apologise again. We are sorry.We accept the report’s findings, which are consistent with our own investigation. He said Tesco had already implemented all the recommendations of the GCA and had completely changed its practices since January 2015. He said Tesco had also stopped asking for payments related to “category captain” status or range reviews, but the company would look at making further changes in the light of Tacon’s planned consultation.
“We have changed the way we work by reorganising, refocusing and retraining our teams and we will continue to work in a way which is consistent with the recommendations,” Lewis said.
While Tesco could not be fined, it could have been required to take out newspaper advertisements laying out its apology. Tacon said she had not used this power as Lewis had publicly apologised and Tesco’s suppliers gave evidence that dealings had now improved.
The supermarket must now report quarterly to the GCA on the measures she has asked it to introduce and Tacon can launch a new investigation if she finds her recommendations have not been followed through.vAnna Soubry, the business minister, said: “Christine Tacon has done a thorough and fearless investigation into a scandalous situation. Tesco say they have changed their practices and I very much hope they have. Paying smaller suppliers on time and treating them fairly is good and proper business. Late payment can hinder the growth and productivity of these suppliers and can threaten their existence.”
27 October 2015
Water firms use 'unacceptable' debt collection tactics
More than half the UK's water suppliers have been sending their customers "unacceptable" debt collection letters, the BBC has learned.
The letters appear to be from an external debt agency, but are actually from the water companies themselves.
The news follows the revelation of similar practices in banks, energy firms and the payday lender, Wonga.
The water companies say they have a duty to tackle bad debt and the letters are sent only as a last resort.
Twelve of the UK's largest water suppliers told You and Yours on Radio 4 that they had taken part in the practice, while five said they are still doing it or might continue to do so in future.
Typically, the name of the debt collection company appears in large print at the top. Often the small print reveals it is linked to the water company, but sometimes no link is made.
'Unacceptable'
Yorkshire Water has been sending letters to some customers in arrears under the name Rockford Debt Collections Ltd.
The stationery has since been changed.
While the large Rockford Debt Collections name remains, small print at the bottom now mentions the link with Yorkshire Water.
The energy regulator Ofgem, which has reviewed similar practice by energy suppliers, said that type of layout is still "unacceptable"
.
The water watchdog Ofwat has written to companies saying the same principles should apply to them.
As a result, Yorkshire Water says it has "temporarily changed" its approach. But it defended the practice.
"Any customer who receives a letter from Rockford would already have received three letters from Yorkshire Water urging them to get in touch, as well as a text," said a Yorkshire Water spokesperson.
Other water companies including Northumbrian Water, Affinity Water and Welsh Water stopped sending such letters earlier this year.
'Aggression'
But the UK's biggest domestic water supplier, Thames Water, is among those continuing with the practice. Its letters, headed County Wide Collections, now state in three places that it is part of Thames Water group. Previously no such link was made.
"We try hard to engage with our customers in arrears. This is a long process, but our open and transparent letters do increase in severity," said a Thames Water spokesperson.
"When it gets to a final letter, we have found the use of an internally branded debt collection agency approach to be effective and cost-efficient," he added.
Ofwat says customers must not be misled or scared into making payments. It told the BBC it still had concerns about the practices of two water companies, but declined to name them.
"We're not saying don't pursue debt," said Gillian Guy, the chief executive of the charity Citizens Advice. "Clearly companies are entitled to do that, but we are saying that they really ought to do that honestly and with some sensitivity.
"These letters are about increasing the level of aggression to get payment and they're made on the assumption that people won't pay rather than actually that many can't."
18 October 2015
British SMEs ‘Owed £67 billion in Unpaid Invoices’
The small and medium sized enterprises (SMEs) across the UK are currently owed a combined total of £67 billion in relation to unpaid invoices.
These figures are according to the Asset Based Finance Association (ABFA), whose research suggests that British SMEs are now typically having to wait longer for their invoices to be paid than at the height of the recession in 2009.
Non-payment of invoices is a major cause of frustration among SMEs and the ABFA’s latest figures suggest that the amounts owed in these circumstances has bee
n on the rise in recent years.
Across the country as whole, SMEs are now owed at least £67.4 billion in unpaid invoices, which represents an increase of 8% on the same figure in 2014 and a huge jump of 36% since 2011. However, the ABFA has said that the true figure of the amount owed to SMEs in the UK is likely to be much higher than the figure of £67.4 billion because its numbers are compiled only on the basis of information on the 180,000 SMEs that submit detailed annual accounts.
According to the organisation, the average length of time that an SME has to wait for its invoices to be paid currently stands at 72 days, a figure up from 61 days in 2009.
The ABFA, however, is keen to convey to British SME’s that their unpaid invoices can be business assets in themselves.
“The scale of unpaid invoices to Britain’s SMEs has become enormous, but there is no reason for it to become a barrier to investment and growth” – Jeff Longhurst, ABFA’s Chief Executive.
He continued- “Businesses need to recognise that their unpaid invoices are an asset. In many cases,
they are the most valuable asset an SME has, and they can be the key to unlocking critical and affordable funding.”
Longhurst went on to say that invoice finance solutions are playing an increasingly important role in the management of SMEs throughout the country.
ABFA’s members include a diverse range of invoice finance companies whose services currently provide a collective total of around £9 billion in funding to British SMEs.
01 September 2015
Small Businesses in the UK suffering from late payment
It has been revealed that a shocking 13 % of micro-businesses in the UK have waited 12 months or more to have their invoices paid, according to new research results released.
A Business survey conducted has found that almost half of companies with less than 10 employees have had to wait two months or more for payment of their invoices and almost 9 out of 10 have been paid later than their invoice terms stated.
This survey of 500 micro-businesses, conducted by YouGov (on behalf of tech companyFreeAgent) discovered that around 30% of firms wait at least a month or more before chasing an overdue invoice with a surprising 28 % chasing payment within the first week after it was due. A meagre 14% of small companies said they had never been paid later than the due date.
Chris Spencer, Operations Chief at leading Commercial Debt Recovery firm Federal Management said of the results “Running a business can be difficult enough without the constant headache of chasing overdue accounts and invoices. In business it’s imperative you get paid quickly – late-paying clients cause major cash flow problems for some companies which in extreme cases can lead to the failure of the business.
Research shows that many UK micro-business owners face real problems when it comes to getting paid on time. We also found that many micro-business owners are waiting for months before they chase an unpaid invoice which is quite often to their own detriment.
Mr Spencer continued “We know that it can be awkward to chase clients and ask them for money, but if you don’t follow up with late payers from the moment that their invoice is overdue, then this can cause problems further down the line and may result in you not getting paid at all.”
Despite the upturn in the British Economy many UK Businesses continue to suffer cash flow issues simply down to late payment of invoices.
28 August 2015
Bailiffs instructed 13,000 times in a year over late London Council tax bills.
Bailiffs were instructed almost 13,
000
times in London last year to collect debts from people falling behind on their council tax bills, a report reveals this week.
Campaigners have voiced that Government benefit cuts have impacted upon the capital’s poorest families, with those targeted including the “working poor” and unemployed, people with disabilities and carers. Many people who were formerly exempt or had subsidised council tax bills are now having to pay by cash-strapped councils who have had Government funding slashed by £1.3 billion in the past two years, the report states.
Too Poor To Pay, by the Child Poverty Action Group and Zacchaeus 2000 Trust, revealed that over 100,000 people were summonsed to court and charged almost £9 million in court fees, this is in addition to their council tax debts.
According to responses under the Freedom of Information Act, the use of bailiffs by Bromley and Waltham Forest councils rose by half compared to the previous year, 2,194 times and 999 times respectively.
In Lambeth, where you will find London’s highest number of food bank users, the bailiffs made 1,605 visits. In Harrow, a woman with a severe mental health condition was summonsed over a £34.50 bill, when the bailiffs arrived the demand was £474. Thirteen councils refused to provide any data or said they did not hold it.
The least number of debt collections were made in Chelsea and Kensington, where bailiffs were sent out just twice, and following this Wandsworth with 161 visits. Islington, Bexley, Southwark and Brent Councils said that they did not use bailiffs.
Council tax benefits were cut in 2013 and replaced with locally run schemes. Only Tower Hamlets and Westminster, Kensington & Chelsea, Merton, Hammersmith & Fulham plus the City, cover full payments.
The report called for the return of exemptions or for all boroughs to cover the worst off. Joanna Kennedy, chief executive of Zacchaeus 2000 Trust, said:
“Around one third of council tax support recipients are in work and some councils report that the number of working claimants is increasing. This is a scandal ministers said they would tackle, but the problem is getting worse."
06 August 2015
Commercial Debt continues to fall
The number of County Court judgments against Businesses in England & Wales has fallen in the first quarter of the year for the sixth year running.
Data gathered from the Registry trust shows that there were a total of 26,195 County Court Judgments (CCJs) issued against companies within England/Wales in 2015 showing a massive 10 percent decrease compared with figures released for the same period of 2014.
Also seeing a significant decrease was the average value of a CCJ issued. The average for the first quarter was £3,340 which represented a 8% decrease for the same period last year. These figures showed consistency for both incorporated and unincorporated businesses which was welcomed by Business experts.
Malcolm Hurlston CBE is Chairman of the Registry Trust and he commented “Business in England & Wales is on an upward trend with many fewer enterprises getting into financial difficulty”
He continued “There would appear now to be a scope for a more positive approach towards borrowing”
The growth of Expert Commercial Debt Collection options available to Companies is also viewed to have had a significant impact on these latest figures.
Pro active Commercial Debt Recovery firms such as FIDUSUK.com can minimise the need for pro tractive and expensive court actions. Fidus boast high recovery rates and adopt alternative collection practices to those of Commercial Law firms.
High Court Judgments also saw a huge drop with only 30 being issued. the lowest since 2008
03 August 2015
2.7 Billion worth of Debt remains uncollected
The latest Government figures released regarding unpaid Council Tax Debt makes startling reading given the current period of austerity the UK is enduring.
Despite the best effort of Councils, Consumer Debt Collection Agents & Bailiffs, over 2.7 Billion stills remains either unpaid or uncollected, since the Council Tax system was introduced in the UK back in 1993.
Department for Communities & Local Government (DCLG) released the figures for July 2015 and they show the North West region as being the worst offender for non payment.
During the financial period of 2014/15 councils collected a total of £570 million in outstanding council tax arrears which sounds impressive but during the same period wrote off a massive £191 million worth of debt as “uncollectable”.
On a positive note, the overall collection rate for this period was 97%, exactly the same as in 2013/14.
The worst performing authorities
| Local authority | Percentage of council tax collected 2014/15 | Percentage of council tax collected 2013/14 |
| Salford | 91.6% | 92.2% |
| Manchester | 91.8% | 91.7% |
| Blackpool | 92.4% | 93.1% |
| Nottingham | 92.5% | 93.2% |
| Oldham | 93.1% | 93.8% |
| Rochdale | 93.5% | 93.0% |
| Middlesbrough | 93.6% | 93.4% |
| Derby | 93.6% | 93.3% |
| Greenwich | 93.6% | 93.1% |
| Kingston upon Hull | 93.6% | 94.2% |
In Greater Manchester, Salford council had the lowest collection rates in comparison the rest of England, 8.4% of uncollected council tax is worth whopping £7.8 million. Neighbouring Manchester fares no better, responsible for a shortfall of a massive £12.3 million, while Blackpool accounts for £4.3 million.
Council tax debts
Citizens Advice and the StepChange Debt Charity have both reported significant jumps in the number of people struggling with council tax debt this year. According to Citizens Advice, it is now the most common problem it sees – it reckons it will deal with 191,400 council tax debt issues this year, which is a 20% increase.
This could be to do with the changes to council tax benefit in 2013 (which saw it replaced with a localised council tax support), which meant that more than two million low-income families have had to pay an average of nearly £140 more council tax a year.
Council tax arrears are classed as a priority debt, so not paying can lead to significant problems. Your local authority can apply to take the money you owe from your benefits or wages, bailiffs can be sent to your home or you could even be sent to prison.
28 July 2015
Insolvency service gets tough on rogue Directors
It has been revealed that disqualification orders made against criminal company directors has massively increased by over 83% in the past year alone.
Despite the governments austerity changes and significant budget cuts, streamlined procedures and more robust policies have enabled the Insolvency Service to take tougher action against poor and rogue company Directors. This has lead to legal orders being made against 119 rogue directors in the year ending 31 March 2015.
This represents a massive increase when compared to only 65 for the same the year before.
Due to the massive spending cuts, The Insolvency Service has laid off more than a third of its workforce over the past few years. They used to employ over 3,200 staff, now that has been scaled down to just 2,000.
Leading companies in the Commercial Debt Collection & Accountancy Industries have called on the Conservative government to back the Insolvency Service with extra funding to ensure high levels of Directorship are kept. Despite the recent crackdown, it is believed there is still far too much criminal behaviour slipping through the net and the Phoenix Company card continues to be abused in some quarters.
Jeremy Willmont, head of insolvency at Accountancy firm Moore Stephens is reported to have said, “While it’s great to see more criminal directors banned from running companies, there is a definite feeling that there are still a number slipping through the net due to a lack of resources.
“Catching serious criminal behaviour by a company director often takes painstaking investigation work, but many believe that a lack of funding and staff limits the Insolvency Service in how many of these cases it can take forward. A spokesperson from their Commercial Team said “We deal with Rogue Directors on a daily basis and it can become very frustrating for both ourselves and our clients. At the very least, there needs to be the threat of potential action for rogue and criminal behaviour.”
Rather ironically, in 2013 it was reported that the Insolvency Service itself was on the verge of becoming insolvent. An emergency injection of government cash was needed for the Government office to stay operational. Documented was a operating deficit of £5m to £7m for 2012-13.
A total of £89m rescue cash was injected from the business department between 2008 and 2012.
17 July 2015
The Northern Powerhouse
A leading business lobby group is calling for greater efforts to be put in place in order to rebalance the economy, creating a Northern Powerhouse.
The Federation of Small Businesses (FSB), a pressure group which protects the interests of the self-employed and owners of small firms, has set out a number of key recommendations it feels must be implemented to deliver a strong Northern Powerhouse. These include:
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Upgrading the UK road network including a tunnelled trans-Pennine route.
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Releasing more details relating to the HS3 and when the electrification of key Northern Rail routes will be addressed.
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Introducing a Universal Service Obligation (USO) for broadband which should be set at 10mbps.
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Improving Local Enterprise Partnerships in England so they engage with small businesses to promote growth and jobs.
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Improving access to finance by improving credit data sharing, considering initiatives such as credit ‘passports’ and ensuring that there is equal access to the payment system by all market participants.
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Supporting regional airports in the north.
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Promoting the delivery and benefits of vocational education and encourage more firms to identify and invest in staff training opportunities.
Lord O’Neill, commercial secretary to the treasury feels that plans should be driven forward to rebalance the decades-old gap between the north and south, commenting: “Businesses are at the heart of this work and that’s why we’re investing in infrastructure, science and skills across the north as well as developing powers to local leaders.”
The FSB is set to hold a number of policy events to find out what businesses need to grow and increase their productivity.
Mike Cherry, policy director for the FSB, said: “The north/south divide has been a stumbling black for the UK economy so we strongly welcome the government’s focus on building a Northern Powerhouse.
“Realising this vision will require increased investment and infrastructure spending in the North of England to boost regional growth, nurture a thriving business sector and get much needed transport connection improvements back on track.”
16 July 2015
Cost of Late Payment for SMEs
Alarming new research from Bacs Payment Schemes Limited has revealed that the cost of chasing up late payment is increasing for SMEs, rising almost 25% from £8.2bn last year to £10.8bn this year.
Bacs, the company responsible for Direct Debit in the UK, says that late payments are “proving a strain for the business sector.”
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80% of companies that suffer from late payment are seeing payment delayed a month or more beyond their agreed terms
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Late payments are forcing 24% of businesses to rely on their bank overdrafts
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Just over a quarter say that they’re paying their own suppliers late as a result of delayed payments
24% of the SMEs Bacs spoke to are aware of government schemes like the Prompt Payment Code, which aim to encourage big firms to publish their payment practices. But there’s a degree of scepticism about these initiatives, and three quarters of small firms don’t think that the government’s plans will affect the speed with which they’re paid.
However, it’s not all bad news on the late payment front. The total late payment debt owed to businesses has fallen by more than £10bn over the past year, going from £41.5bn to £31.3bn. In terms of SMEs, their share of that debt has dropped £5.6bn to £26.8bn.
Commenting on the findings, Mike Hutchinson from Bacs said: “Our figures show that while the late payment landscape is improving in terms of the totals owed, it is at a cost, and a very real one, with SMEs having to dip into their pockets to chase money they are owed.”
02 June 2015
Cash Flow
Good cash flow management is essential in every small business if it is to succeed and grow. Our guide includes expert advice and tips to give you the confidence to manage the cash flow in your business.
As any small business owner or adviser will tell you, cash is king. It's a well-known saying but what exactly does it mean?
Put simply, businesses go bust in the long term through lack of profit, but in the short term, they fail because they don't have enough cash to pay their bills. Cash flow is the life supply of any business - more firms go under because of cash flow problems than
anything else.
The principles of good cash flow management are straightforward. First, you've got to make sure you've got more money coming in than going out. Money also needs to come in on time, so you can pay suppliers and invest in new stock. Having access to cash also gives you better buying and negotiating power, which could save you money long-term. Anticipating any shortfalls in funds is important too, as this allows you to make contingency cash flow plans such as extending credit.
Managing money and cash flow are critical for small firms - but if you can get the basics right, you'll be in a strong position.
26 May 2015
Defence has been filed?
A Defence has been filed in your action: what happens now?
Once a claim is defended, depending on the size of the debt the case will be allocated to one of the following tracks:-
Small Claims Track – Claims under £10,000
In the Small Claims track the court will provide you and your Defendant with a Directions Questionnaire which must be completed by the due date given by the court failing which your claim or the Defendant’s defence can be struck out by the court.
Under the Civil Procedure Rules it is a requirement that the parties should make every effort to settle their case before the hearing. This could be by discussion or negotiation or by a more formal process such as mediation. The court will want to know what steps have been taken. Settling the case early can save costs, including court hearing fees. Failure to explore settlement or alternative dispute resolution may lead to the Court penalising you on costs.
The court provides a free mediation service for disputes within the small claim court. Mediation is a way of negotiating an agreement with the help of an impartial third person. You are given a one hour time slot by the court where both parties must be available.
In small claims each party bear their own costs, other than those awarded by the court on the proceedings, these are the initial court issue fee, late payment costs, interest, hearing fee and sometimes travel costs to the hearing. Some parties choose to represent themselves, but we are frequently able to offer fixed cost options for representation at trial, if that is wanted.
Fast Track – Claims between £10,000 – £25,000
The fast track is usually for more complicated issues to be decided, but generally only where the trial will take no more than one day. It will be up to the Judge to decide on what directions are relevant for each claim, and these can change from case to case. Below are the standard directions along with the likely timescale:-
- • Disclosure – 4 weeks after allocation
- • Exchanging Witness Statements – 10 weeks after allocation
- • Exchanging Expert Reports – 14 weeks after allocation
- • Court send out Pre-trial checklists – 20 weeks after allocation
- • Deadline for returning pre-trial checklists – 22 weeks after allocation
- • Final Hearing (Trial) – approx. 30 weeks after allocation
More detailed advice from your legal adviser or representative will generally speaking be needed in order to ensure that you properly comply with the various obligations that arise under this timetable, and to be confident that you are properly prepared for the trial.
Multi-Track – Claims over £25,000 or more complex claims with lower values
The multi-track usually deals with very complicated cases and there is no standard procedure, the court will deal on a case by case basis and they decide on the most suitable way to proceed. Both parties must file proposed directions along with the directions questionnaire, whether or not they are agreed.
The court will set a case-management conference for all parties to informally meet with the Judge to review the progress of the case, this may involve the following:-
- • Review of the steps taken by both parties on preparing the case.
- • Ensure both parties have followed, or following any directions set by the Judge.
- • Further directions given to make sure both sides understand the case.
- • Making note of any agreements with each party on any mart of the case.
- • Timetable of additional steps (if necessary) given by the Judge.
- • Monitoring costs.
After the Judge has looked at the pre-trial checklists, they may decide to carry out a pre-trial review, the purpose of this is to decide a timetable for the trial, who will give evidence and in which order, content of the bundle and a time estimate for the hearing. Because of the complexity and value of multi-track disputes it is always recommended that you should take proper case-specific advice from the earliest stage, and that you also ensure that you are appropriately represented at any interim hearings and at the trial.
Important Notice - Court Fees Increase on Monday, March 9th
06 Mar 2015
On Wednesday March 4th, the House of Lords approved the motion to increase court fees for civil claims. This was expected to take effect in April 2015 but has been revised and brought forwards.
The new fees are applicable from Monday, March 9th. In summary:
- Claims below £10,000: No change to the court fee
- Claims between £10,000 and £200,000: Court fee 5% of the value of the claim
- Claims above £200,000: Court fee capped at £10,000
The 5% will take into consideration the principle amount claimed (plus collection costs if applicable) and accrued interest.
If you have any queries, or if you’d like a copy of our new scale of fees which reflects these changes please call our Litigation Department
05 March 2015
We need a universal culture of prompt payment' - CBI
Despite the majority of businesses agreeing and sticking to fair payment terms with their suppliers, we need to ensure that all companies have a culture of prompt payment, says the Confederation of British Industry (CBI) submission to the Government’s consultation.
The national late payment debt stands at over £30 billion with the average business owed £31,000. With the economic recovery gaining traction and order books picking up, now is the time when working capital can become particularly stretched.
Matthew Fell, CBI Director for Competitive Markets, said: “Most companies agree and stick to fair payment terms but we need to create a culture of prompt payment in all businesses. It’s unacceptable that many firms are being held back from growing and creating jobs because they are owed thousands of pounds.
To tackle this problem, the CBI is recommending:
That all companies publish their supplier payment policies on a voluntary ‘comply or explain’ basis.
The introduction of a ‘target’ maximum payment term, with flexibility, recognising that a one-size-fits-all approach will not work, because more complex contracts may require different terms.
As part of the Prompt Payment Code, introduce an ‘upper tier’ for companies who wish to sign up to even higher standards, for example by committing to more detailed reporting on payment performance, or shorter timeframe.
That larger companies give clear guidance on their websites clearly stating how their payment process works and set up online finance platforms to simplify the payment process.
That the Government sets out clear guidance around the legal term ‘grossly unfair’ in contract law, so that businesses have greater confidence when negotiating payment terms.
(Source - CBI Press Release dated 31st January 2014)
03 March 2015
Make Collections Pay
These days we need to be increasingly resourceful to ensure our debtor’s ledger does not harm our business operations. In our opinion, by far the best way to manage an aged debt is to ensure the late payers fund the cost of collecting; that is not as difficult as it sounds. The Late Payment of Commercial Debts (Interest) Act 1998 make it extremely easy to add charges to unpaid invoices which can be used to fund the collection costs. Better still, add the charges into your Ts&Cs.
01 March 2015
The Secrets to Success -
2 of 5
Don’t delay – Refer your overdue accounts as soon as possible…
Research has shown that collectability decreases by 10% for every additional 30 days an account is overdue. Our ‘Top Tip’ would advise putting processes in place to ensure outstanding accounts are referred without delay this will work to maximise your recovery ratios. The Collectability Index below illustrates how time can affect collection ratios.
28 April 2015
Top Tips to Success – 1 of 5
Litigation - More than just a threat!
In our experience threats of litigation must be reinforced by a genuine intent to litigate in the right circumstances. Aside from creating a compliance nightmare, hollow threats lack credibility and will quickly be ignored. The challenge is in ensuring you are not throwing good money after bad and there is likely to be a return on the investment.
We examine each individual case carefully and prepare a detailed report. This enables our clients to make the most informed decision possible to guarantee the right outcome.
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