Due diligence – If something doesn’t feel right, act on it
Recently we were instructed to investigate the matter of an unpaid, £25k account. Something didn’t feel right about the claim, right from the start.
Our investigation showed a complicated trail of untruths and fraud. Including fake websites, identity fraud and hacked emails. We immediately advised the client to call in whatever guarantees they held but the prognosis wasn’t good.
This isn’t the outcome we want for any of our clients. So, following this costly and inconvenient process, we have been able to educate our client on how to strengthen their processes. Central to their improvements was incorporating simple but effective ‘due diligence’ checks. These checks provide business owners with a greater volume of business and financial information about their potential clients. Which will then aid them in deciding who they deal with next time.
Don’t be worried to ask for client details. Like many things in business, its the way you ask. Having processes like this in place is professional and should provide client reassurance.
1.Treat every customer as a potential debtor !
2.Have an account opening form. Make sure you know who you’re dealing with.
3.Compare and contrast paperwork e.g. purchase orderhttps://www.thegazette.co.uk/s -Is everything as it seems?
Regular readers know that we advocate checking and double checking all prospective client and supplier data. The more financial information you hold about a contact, the more informed your decision making will be and the more limited your exposure and risk.
Imagine this, two people come to you, promising the earth. You’ve heard of them before but you need to learn more before you can decide who best to side with.
For the sake of this example, let’s call one
Alexander Boris de Pfeffel Johnson (or Boris to his friends) and the other
Websites – Check the clients own site, look at reviews etc
Account details – Have a pro-forma to collect client details. If you would like a blank template, email us
Simple due diligence shows us
Was born in June 1964 and has a known address in London N7.
Official records show that Boris has only ever been a director of one company, Finland Station Limited.
The company was formed in April 2006 and for the first 11 months was actually known as Blackrock Productions.
Boris was a director from the inception of the business but resigned his role in May 2008.
The business was subsequently closed down in April 2016.
From 2010, the business had only ever filed dormant or small business accounts and as a result, the established trade reference agencies last rated the business as high risk.
From this point, Boris does not appear to have a direct responsibility in any limited company business and so one may question both where his income is derived and his financial strength, key questions to ask when offering goods or services on credit.
Jeremy on the other hand :
Was born in November 1966 and has a known address in Farnham, Surrey.
Records show Jeremy has a history of creating and managing businesses as far back as 1990.
The majority of said businesses continue to exist to this day.
Perhaps most successful was Hotcourses (Hotcourses Foundation) that was rumoured to have been sold in 2017 for around £30M, netting Jeremy a reported £14M.
Jeremy continues to appear to be listed as a director of the business and although it is believed that his focus may be on other matters, there may be a dividend income to be coupled with his recent investment return.
In short, had our new client conducted the same simple diligence checks that we encourage all of our contacts and readership to complete, they could have avoided the prospect of a long, drawn out battle for money and power…. Unlike Boris and Jeremy J
If you have any questions or would to know more about our services please get in touch – Contact Us
Brexit continues to keep the continued poor state of the economy out of the headlines. However, the spectacular collapse of British Steel has brought economics back into stark focus with a bang.
Anybody who has a measure as to financial indicators knows that the liquidation of British Steel was always on the cards. Plus it was always going to be sooner rather than later.
Simple diligence investigations
Look into the parent company, Greybull’s other purchases shows numerous high profile business failures in recent years. Most notably electrical giant Comet and then Monarch Airlines. All of which ultimately cost the taxpayer a whopping £60m.
British Steels share price fell a staggering 80% over the last 14 months. An clear indication that experienced traders were pulling their money out, rather than investing in.
A review of British Steel’s accounts show a cash injection of £154m in the last financial year. Followed by a Government loan to the tune of £120m. All this demonstrates a serious miscalculation in both future trading and the accounting process.
Every business owner whether at the head of large or small company, know it’s still very tough economically. So let’s be frank, it’s never been easy and it never will be. It’s how we educate, identify and manage the financial pressures that counts.
Business hunches are usually correct. If you have doubts about a customer or a supplier, then there are quick and easy ways to determine whether you may have increased exposure or risk.
Take the above examples about British Steel as a guide ;
Simple checks through Companies House and credit reference agencies will tell you who in fact is behind a company and that they may not be all that they seem.
Larger businesses with a share issue allows you to review periodic results and ratings, which can provide an indication as to whether a company is on the up or on the slide.
Most limited companies are forced to file financial accounts that are available to the public. By reviewing these, you can determine how well, or how poorly, a company is being run.
British Steel isn’t the first and it certainly won’t be the last industry giant to fold. What’s important is what we learn from the failure. What indicators we use for the future and how we ensure that we’re not one of those caught up in the ripples of debt that ultimately flow down the supply chain.
How can we help?
To learn more about the benefits and costs involved in outsourcing your credit controlto Corporate and Commercial please get in touch. We’re a friendly and professional team who want to help your business succeed. Email email@example.com or Call 01535 654 594
Ah Summer Time…. A time for unnecessary sun cream purchases, lonely garden furniture and barbeques in the rain.
However it’s also holiday season and just as business owners need to plan their own holidays, they also need to plan for the effect holidays can have. After all, you don’t want to be giving your cash flow a holiday too do you ?
Wages still need to be processed and paid. Bills and invoices still require payment. Therefore you need ‘your own’ invoices settled promptly and accurately too, in order to keep the cash flow moving and ultimately allowing you to have a stress free, well deserved holiday.
If you’re already a Corporate and Commercial credit control customer, then you can just kick back and relax, knowing that you have a dedicated credit controller to be on top of it all for you.
However if you are short on time, resource or desire, you may need these tips:
3 Easy Steps to Avoid Cash Flow Stress when on holiday.
Remove any potential payment delays. If there’s a query that you’ve promised to resolve, get it done. Invoices are not going to be paid whilst an issue remains. Don’t give a debtor an excuse for delaying payment until you return by saying… ‘you were meant to sort that for me’.
Invoice promptly and correctly. If there’s an invoice that can be raised, raise it. Even if it’s for part of a project, get the invoice raised. It’s better to have some monies coming in whilst you’re away than none at all.
Plan for payment. Send an email with the invoices that fall due in your absence to your customers. Something along the lines of…. ‘Dear John, just a quick note to supply you with your invoice that will fall due on the 16th August. I’m away for a few days beforehand so just felt it prudent to get this across to you just in case. My accounts team are on hand should you wish to discuss this further, otherwise we’ll keep an eye out for your payment on the day’.
In short, treat your accounts as you’re treating your impending holiday. Make a plan, prepare and execute. Taking these simple steps before you go can guarantee a good night’s rest whilst you’re away. Safe in the knowledge that you’ve done what you can to maximise the return of your monies.
When Prince William, the future King, champions a cause, people usually sit up and take notice.
One topic the Prince is bringing to the fore is mental health. So with this being Mental Health Week, we at Corp & Comm felt it prudent to highlight the steps you can take to reduce a business’ financial concerns and worries.
There is a widely accepted link between financial wellbeing and mental wellbeing. Although it is the consumer element of debt that makes the news, there is a very real necessity and importance to address the requirement to have commercial financial wellbeing on an even keel.
Research from Nesta, the innovation charity shows that 40% of British entrepreneurs have admitted that managing their finances and banking has become the most stressful part of running their business. Being forced to give up evenings and weekends balancing the books, is unnecessarily burdensome. The stress is taking its toll with 17% saying it has made them unwell.
Financial gain may not be everybody’s motivator but it is certainly an enabler. Every business owner knows that when their business is doing well, they can afford to pay the correct wages, order stock, invest in technology etc which in turns boosts everybody’s wellbeing.
The simplest way of summarising how to achieve commercial financial wellbeing is this : Ensure that your incomings either match or are above, your outgoings.
Ten Commandments of Credit Control
We at Corp & Comm champion ‘The Ten Commandments of Credit Control’. Through our training days and university presentations, we encourage everybody to factor at least one or two of the Commandments into their day to day credit control process, to ease the burden.
Good credit control is measured by having a successful, robust process in place that can be applied to each and every matter, irrespective of size, age or customer. The ability to keep systems uniform, exact and regular removes the stress and anxiety of reaction and then action.
Having a plan in place and sticking to it, allows each and every business owner to be confident in their ability to recover their monies and in doing so, move on to other more pressing matters whilst all the while maximising the payments into their bank.
As we’ve said, finance may not be every person’s motivation but finance is both the key and the lifeblood to every business. Without cash, every business will fail. Simply apply just some of these simple steps and take action to ensure that your business’ finances don’t become an issue.
One in seven, (14%) of small and medium-sized companies fell victim to invoice fraud during the past year, according to Barclays research.
These fake requests for payment or to update a client’s bank details are emailed by fraudsters, who disguise themselves as regular suppliers. They can also be costly, with 28% of reported scams resulting in losses of more than £5,000.
How does it happen?
Invoice fraudsters are often aware of the relationships between companies and their suppliers, and will know the details of when regular payments are due. The fraud may only be discovered when the legitimate supplier follows up on non-payments.
Fraudulent letters and emails sent to companies are often well-written, meaning the fraud is difficult to spot without strong operating processes and controls in place. Email addresses are also easy to spoof, or in the case of malware-infected PCs, criminals can access genuine email addresses.
The process of changing the bank details of someone you are paying should always be treated with extreme caution.
Here at Corp & Comm we are obviously aware, trained and vigilant against these threats, as part of servicing our end to end credit control anddebt recovery clients. However if you don’t currently outsource your credit control to experts, it’s worth considering how to prepare your teams against the risk:
How you can help to prevent invoice fraud – a checklist
Always verify details of any new/amended payment instructions verbally by using details held on file, and not on the instruction. Fraudsters can spoof email addresses to make them appear to be from a genuine contact, including someone from your own organisation.
If you are suspicious about a request made by phone, ask the caller if you can call them back on a trusted number.
Fraudsters will attempt to pressure you into making mistakes – take the pressure off by taking control of the situation.
Consider removing information such as testimonials from your own or your suppliers’ websites or social media channels that could lead fraudsters to knowing who your suppliers are.
Look carefully at every invoice and compare it to previous invoices received that you know to be genuine – particularly the bank account details, wording used and the company logo.
Consider setting up single points of contact with the companies you pay regularly
Apply the same principles to requests from within your own organisation
Electronic payments in the UK are made based on sort code and account number only, and any account name given is not routinely checked, therefore independent verification is important.
Regularly conduct audits on your accounts
Make all staff aware of this type of fraud, particularly those that are responsible for making payments.
Outsource Credit Control– Employing experts to deal with your invoices, payment details and cashflow has several advantages. It frees up your time to focus on other priorities, it adds a specific skillset to your team, limits risk and improves cash in the bank. If you would like to discuss how we can help please just get in touch.
Cyber Insurance – An added layer of protection can also come in the form of insurance. As with other areas of our business we have to consider the exposure and risk. So it is also worth considering your requirements for Cyber Insurance. We spoke to Jamie Illingworth, MD of Illingworth McNair to understand this area further:-
“It is vital that SME businesses look to protect themselves from the threat of cyber attack. These threats are becoming more prevalent and advanced in nature. The cost of cover used a barrier to SME’s but now products are available to protect businesses at affordable rates”
We get the point, the whole system needed to be dragged into the 21st century. After all the HMRC have historically run an antiquated process. Determining tax by asking businesses to declare how much they’ve invoiced.
However integrating an electronic accounts package into your day-to-day working obviously leads to questions such as…
Which package do we choose ?
What is compatible ?
Which one works best for our needs ?
On a daily basis, we access many different accounts packages whilst we manage and administer our client’s credit control functions. As a result, we’re well placed to pass on our independent opinion about which accounts systems work best and why.
There are many different accounting packages in the marketplace such as Harvest, Kashflow, Wave etc. Some new, some old, all are unique and all fulfil a purpose. However for the sake of ease, let’s concentrate of the big three providers, these being:
Sage is generally considered to be the originator and has a well-established name within the accounting industry but this may well prove to be its downfall. Although Sage are working constantly to improve its ‘user friendliness’ and are launching various different models to stay ‘in vogue’, in our opinion Sage is only great if you have a good grasp of accounts from the outset. For businesses with less accountancy knowledge then Sage may not be the best introduction to accounting software.
Quickbooks has also been around for a while. They were pioneers in the low cost, static, computer based package but in turn were a little slow in developing the on-line element of their software. They are more than making up for this now and their advertising presence has increased dramatically during the last few years. However in our opinion, although Quickbooks are nearly there with the customer ‘interface experience’, there still remains further work to be done on usability and business ‘add-ons’.
In our view Xero is the best starter package for a business looking to gain control of both its accounts and its credit control function. Whereas we think Sage suits accountancy people with a grasp of business, we think the opposite of Xero. We believe it helps business people in gaining a more simple understanding of their accounts. Because of this, the simple functionality and the suite of optional business ‘add-ons’ we think Xero suits the ‘masses’ more.
Furthermore Gavin McBride Director of Smith McBride Chartered Accountants and Tax Consultants shares our view:
“As a practice we have had experience with most if not all of the bookkeeping software on the market. Xero is our preferred choice for our clients to use. The main reason being that they find it easy and logical to use. Xero can really help a business owner to run a much more efficient business and keep track of who owes them money! It can also help them to keep a handle on how much money they are or are not make day to day”.
When making your choice here are things to consider
In our opinion, a good accounts package should include a minimum of 3 key elements:
1. Have the functionality to raise invoices on a daily basis, to either one individual client or a number of clients in a run. With the ability to then be able to email both the original invoices and provide copies at any given time. This allows the essential process of billing to occur without delay.
2. Allow you to create a statement of account for an individual client, with no barriers as to dates, values or numbers of transactions. This gives you the ability to remind customers of their complete balance and so encourage ledger clearance.
3. Have the ability to raise management information reports, to highlight what monies are owed to you and by whom. This can create a process for the pursuit and recovery of your outstanding monies. This provides you the ability to manage your aged debt and your cash flow.
Successful cash flow and credit control is all about getting the basics right and this without doubt very much includes choosing the right accounting systems and credit management partners to work alongside your business.
The more aspects of your systems you get right at the start, the lesser the problems created down the line.
Over 20 years of trading, training and guidance has taught us here at Corp & Comm that…
‘an ounce of prevention is worth a pound of any cure’.
Here are more blogs to help with credit control and debt recovery. Alternatively feel free to contact us.
Politics!! – It affects business whether we like it or not.
Many have tried to turn a blind eye (and ear) away from the ‘B word’ or Brexit!
However, there are some key considerations to remember when it comes to supply and the subsequent credit management.
In various industries there is talk of contingency measures being taken, to mitigate potential supply problems from March. One of the measures being banded about is ‘stockpiling’.
Typically, this will have a greater impact on the supply of goods but service industries may experience issues too. For example if paper prices increase, this would have a bearing on printers, training companies e.t.c. having a domino effect.
Now there may be some whom will live with the mantra… ‘make hay whilst the suns shines’ but we must all be aware of the risks that increased stockholding could bring and have contingency plans:
You’ve carefully vetted and checked your customers and have determined a credit limit that both you, ‘the Supplier’ and the client, ‘the Buyer’ are comfortable with. Should the Buyer suddenly exceed this limit, without the guarantee of a pending order to fund the increased spend, are they going to be able to clear the larger supply invoice ?
So the Buyer has a warehouse full of stock ‘just in case’ but a larger stockholding is not a pre-cursor of larger revenue. In fact, it could lead to quite the opposite. Should there not be an increased demand for items, the Buyer may be forced to sell at a lesser price, which leads to lesser revenues, a squeeze on their cash-flow and decisions as to which Suppliers to pay.
Finally let’s not forget the possible issues the Supplier may face with stockholding. The costs to any Supplier in fulfilling a larger Buyer’s order obviously increase. The question any supplier should ask is… can I afford to invest in fulfilling this new order and if so, how can I mitigate the exposure and risk of the costs for same ?
There are a few key principals as to how to mitigate invoice exposure and risk, we’ve covered them previously in both our past articles and on our various website blogs such as ‘The Ten Commandments’
If you want to know more, then contact our team today.
Let’s make no bones about it, the next few months are a period of uncertainty for all of us.
Brexit is finally happening! Judging by the noises coming out of parliament, the deal is not going to be to everybody’s taste.
The High Street is in a state of disrepair, both physically and metaphorically. A recent ……. survey claimed that inner city retail outlets were closing at a rate of 14 a day !
Now more than ever is the time for you to know who you are dealing with. Also just as importantly who they are dealing with ?
On face value, you may not have a direct dealing with an import or export company, or indeed that of a High Street retailer but it is imperative that you start to trace the business path.
Christmas gives everybody a great opportunity to speak with your customers. Whilst you are speaking to them to wish them well for the festive season, ask them the questions that will give you the information you need to make some measured judgements.
“I know a little bit about your business but please tell me briefly, who are your major customers,
what type of clients are you looking to attract and are there any particular industries ?”
“We were having a discussion here the other day about whether Brexit will affect us, do you think it
will affect your business in any way ?”
“What’s your thoughts on the current state of the retail industry, do you think it will
have any bearing on businesses like your and ours ?”
You’re trying to ascertain whether at some point in the future, your customers will be affected by the uncertainty to come.
Will Brexit impact their costs or margins ?
Will the reduction in High Street trade reduce their revenues and cash flow ?
Remember, 8 times out of 10, a debtor is only a debtor by circumstance. Something has impacted upon their money chain. A major customer has gone bust or a supplier is delaying goods for sale. This impacts on their revenue and cash flow. Often your customer has no other choice than to pass this pain further down the money chain. Including delaying payments to their creditors whilst they resolve things.
The more informed you are about your client’s exposure and risks, the more able you are to identify changes in trading patterns and payment schedules. This will then enable you to react faster, when taking actions to ensure your cash flow is not the one that is affected.
Christmas may well be the season of good will but it must also be the season of good practice.
We are here to help. So if you would like to get our advice or use our services please get in touch>>>
Regular readers to our newsletters, blogs and social media will know that we’re championing insolvency regulation and law changes.
The goal is to prevent reckless company directors from evading all liabilities, with such ease when their companies enter insolvency.
The process of closing a business and then ‘phoenixing’ a new company from the flames, free of debt needs to stop. It is the scourge of all small businesses.
We’re campaigning with the Government’s Small Business Commissioner Paul Uppalfor changes in both law and legislation. Reckless directors must remain responsible and be held accountable for their actions.
We reported last month discussions we’d had with the Commissioner’s office about what changes needed to be implemented. This directly led to meetings both with the business regulatory bodies i.e. Companies House and in the annals of power in Parliament.
Notably the Government said it wants to stop the practice known as ‘phoenixing’. Plus it stated that for the first time, directors dissolving companies to dodge debts will face misconduct investigations.
Change is starting to be noticed. Indeed Stuart Firth, President of the Insolvency and Trade Body R3 stated… “The Government’s announcement that it will look to disqualify directors of such companies, is an important part of ensuring that directors are less likely to walk away from their responsibilities”.
Now we’re not stating that we’re directly responsible for these steps but we’ll happily take some credit where necessary.
We’ll continue to converse with the Commissioner’s office and the next stop is conversations with The Insolvency Service, to discuss how we can put these plans and ideals into general practice.