Tag Archive: risk

  1. British Steel has brought UK economics back into stark focus

    Leave a Comment

     

    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 control to Corporate and Commercial please get in touch. We’re a friendly and professional team who want to help your business succeed. Email info@corpandcomm.com or Call 01535 654 594

  2. Will regulation force businesses to name & shame themselves for late payments?

    Leave a Comment

    The Government continue to acknowledge the devastating impact late payments have on SME’s in their Spring Statement:

     

    Philip Hammond said “I announced a year ago that we would take definitive action to tackle the scourge of late payments for our small businesses. A full response to last year’s call for evidence will be published shortly, but I can announce today that as a first step we will require company Audit Committees to review payment practices, and report on them in their Annual Accounts. We will announce further details in due course. “

     

     

    This seems to be the Government’s grand idea to make larger companies more self accounting. By having them publish the typical time taken to pay suppliers. Also requiring them to employ a non-executive director to be responsible for this and to hold them to account.

     

    Is this another government white elephant initiative just in time for the launch of Dumbo in the cinemas or will it really help tackle late payments?

     

    The Facts

    Late payments continue to negatively impact small enterprises in the U.K. The Chancellor of the Exchequer has stated that larger firms should have a director in place to help reduce delays. Elsewhere, late payments impact contractors focused on emergency repairs in the U.S. Virgin Islands after the 2017 hurricanes.

     

    Any company dealing with the larger UK companies know they often dictate their own payment terms. So what’s to stop the firm simply extending the payment terms. As long as they adhere to the extended terms, then will they be deemed as late ?

     

    Also how effective is a non executive director going to want to be in holding the company to account that is paying their wages ?

     

    Another challenge is whether the larger companies will adhere to the request, or will it be another ‘toothless tiger’, akin to the Government’s voluntary Prompt Payment Code?

     

    Recent surveys by the BACS payment scheme showed the direct cost of late payments to small businesses is currently valued at around £2 billion. With the FSB have commenting  that a typical SME is owed on average £6,142. It is estimated that as many as 50,000 firms go out of business each year because of problems related to late payment.

     

    What can you do?

     

    It’s not enough to allow the larger businesses to regulate themselves, it is imperative that all SME’s manage their exposure and risk in a prompt and pro-active manner.

     

    Where possible invoice little and often.

    Not only does this remove the spectre of having your cash flow tied up in one big invoice, should a smaller invoice be paid late, it alerts you to the payment practices of the customer and allows you to react to same for the future.

     

    Be proactive and not reactive.

    Have a set, robust credit control procedure that ensures that you are pursuing invoices as and when they become due (and before if possible). The sooner you are aware of a late payment, the quicker you can resolve same for the sake of your business and your sanity.

    For more ways to manage your exposure to risk take a look at our Blogs or Contact Us.

     

     

  3. The ‘B’ Word…..Brexit! Can I plan in the Uncertainty?

    Leave a Comment

     

    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:

     

    Consider:

    • 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.

  4. High street misery, Brexit…How can you manage the affect on your business?

    Leave a Comment

     

     

    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.

    Examples:

     

    “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>>>