Business Credit Management UK

SME's lack of credit awareness

2011-09-20T16:26:00.000+01:00

Experian’s survey of nearly 700 UK small businesses found that 71 per cent did not check their customers’ credit status, exposing them to a greater risk of being paid late or not being paid at all.
The survey also revealed that 39 per cent of small businesses did not know what a credit score was, while 61 per cent have never checked their own score. Businesses that do not check their scores are unlikely to be aware of any issues until they lose out on a contract with a potential new customer, are refused materials from a new supplier or are turned down for finance.

Simon Streat, Managing Director of Experian’s UK SME business, said: “Two thirds of small businesses may be blind to their credit scores, but their larger customers, suppliers and banks certainly won’t be.

“Failure to address credit problems may put small and medium sized businesses at a big disadvantage, as many organisations will be put off engaging with a company that has a low score. It is important for businesses to monitor their credit score on a regular basis to ensure it reflects their situation accurately and to be able to take action to resolve any issues that are highlighted.

Why does this situation exist when bad and doubtful debts are running at an all time high?

Sun, sea and stress for UK business owners - Business Credit News UK

2011-08-26T14:32:00.000+01:00

Sun, sea and stress for UK business owners - Business Credit News UK

Government should re-think on micro-business plan

2011-08-19T12:17:00.000+01:00

The Institute of Credit Management (ICM) has launched a petition with Graydon UK, the commercial credit referencing agency, to prompt a Government rethink on plans to exempt micro-businesses from having to file accounts at Companies House – plans it believes will seriously hamper the economic recovery rather than encourage it.

The move follows the publication of figures from a recent survey of its 8000 Members that posed the simple question: if accounts for a potential customer wanting to place a relatively small order with you were not available at Companies House or via a Credit Reference agency, what would you do?

Nearly 37 percent said that they would not approve the order for immediate supply, reject the account and insist on cash in advance; 15 percent said they would accept the increased risk and trade anyway; and more than 48 percent said that they would ask the customer to provide financial data to support their application.

The findings support the ICM’s view that exempting micro business from filing accounts is wholly the wrong way of tackling what is a comparatively simple issue: businesses should be prepared to provide more information not less: “Without audited numbers that can be trusted, banks will not lend and suppliers will not extend credit to their customers,” says Chief Executive Philip King. “Growth will be restricted, not encouraged.”

The ICM’s survey follows similar research in June from Graydon UK that showed that 91 per cent of credit and finance professionals believe that the proposals will make it harder for small businesses to access trade credit, and that 87 per cent of respondents did not believe that the Government’s plans will help drive business growth.

'CreditMan' supports the ICM and Graydon UK and we urge you to support the petition, by going to: http://www.surveymonkey.com/s/8KGN5BH

Q2 2011 administrations at the lowest level since before the financial crisis

2011-07-26T16:54:00.000+01:00

Administration appointments in England are at their lowest level since Q4 2007, well before the current financial crisis, according to Baker Tilly Restructuring and Recovery LLP.

There were 553 administrations from 1 April to 30 June 2011 which is a 14% decline on the first three months of 2011 (643) and fall of 13% against Q2 2010.

The figures, compiled from advertised administration appointments in The London Gazette, show a decline across all regions in England except for the North East which has seen a modest increase.

Are we seeing the light at the end of the tunnel as far as administrations are concerned?

Retail insolvencies are on the up whilst manufacturing are down.

2011-07-11T13:52:00.000+01:00

The UK’s multiple retailers closed 20 stores a day on average across the UK between January and the end of May this year, according to data compiled on behalf of PwC by the Local Data Company (LDC). The data also revealed that across multiple retailers in 300 town centres, clothes, shoe shops and jewellers have been amongst the hardest hit in 2011. Supermarkets, convenience stores and cafes have bucked the trend showing growth in the first half of the year.

PwC’s latest retail insolvency statistics for Q2 2011, released kast week, have also revealed that there were 375 retail insolvencies this quarter, 9% more than the same time last year.

PwC research indicates that, since the start of the recession, financially troubled retailers have closed, or plan to close, on average half their store portfolios as the high street comes under increased pressure. PwC examined the announcements of eight high profile failed or struggling high street retailers and found that on average 51% of the total store portfolio have or could be closed.

In contrast manufacturing insolvencies are down 26% in second quarter.

Data also from PwC confirms that manufacturing and construction have been the hardest hit sectors since 2009, although both did slightly better in the second qurter of 2011 than the first three months.

In total, 4,058 manufacturing companies collapsed between Q3 2009 and Q2 2011. The retail sector has also been badly hit more recently, with announcements from Thorntons clouding the skies of the UK recovery. In the same period, the retail sector has seen 3,513 companies collapse.

The reason for hope came from the comparison between Q1 and Q2 of this year – manufacturing insolvency was down by 26.5%. PwC’s manufacturing spokesperson Philip Hines said: “There still remains uncertainty over current manufacturing order levels and the continued strength of the recent manufacturing recovery. Unfortunately this could imply further insolvencies in the second half of this year."

It remains to be seen if these trends will continue.

HMRC faces huge loss in tax debt after letting companies put off paying bills

2011-06-15T15:13:00.000+01:00

Time to Pay scheme to help struggling businesses through the recession has racked up at least £650m in tax debt.

The taxman could be facing a loss of up to £650m in tax debts it allowed to build up as part of arrangements to tide businesses over during the recession.

New figures show there is just under £1bn outstanding as part of the government's "Time to Pay" arrangements. The scheme enabled HM Revenue & Customs to strike deals with struggling businesses to give them longer than usual to pay their tax bills.

Of that £1bn, £650m has not been paid as initially agreed by HMRC with the businesses concerned. The figures were obtained by R3, the insolvency trade body. It is understood that some businesses have seen their HMRC debts effectively rolled over four times, R3 said.

Frances Coulson, R3's president, said: "Time to Pay has played a vital role in preventing the spike in corporate insolvency numbers that usually follow the end of a recession, but these figures give rise to serious concerns about the way the scheme is operating."

"Time to Pay should be used as breathing space for businesses undergoing temporary difficulty. However, if a business is on their third or fourth referral, that should act as a warning sign; it indicates that there are underlying problems with its cash flow. It should make HMRC question the financial viability of that business."

Between the launch of the scheme in November 2008 and the end of March 2011, Time to Pay struck more than 400,000 deals, allowing breathing space on £7.4bn of tax debts.

The scheme was widely welcomed when it was introduced, but HMRC faces a challenge to unroll the arrangements. If the structures are dismantled too quickly as the economic situation improves, many businesses could go to the wall.

"Research shows that one in four corporate insolvencies is caused by another business going into insolvency," Coulson said. "This means that should the businesses who have had multiple Time to Pay arrangements fail, not only will the government be left out of pocket, but a considerable number of businesses would be left exposed."

HMRC sources insisted that the £650m debt was "collectable", and would be recouped either under new Time to Pay arrangements, or as part of normal debt collection procedures.
An HMRC spokesman said: "The majority of businesses that have entered into time to pay arrangements with us are fundamentally viable and are still in business in no small part due to the practical support provided by our time to pay arrangements.

"Around 90% of the tax that was rescheduled has been paid and this, coupled with the enormous benefits that small businesses deliver to the country through their tax revenues, jobs, and long-term expansion, strongly justifies our pragmatic approach."

Business failures leave directors liable for debt

2011-05-18T16:20:00.000+01:00

As the latest insolvency figures reveal a harsh picture of trading conditions for the UK’s small businesses and self-employed, business owners are cautioned against using personal credit to help keep their business afloat.
According to the Insolvency Service, self-employed bankruptcies made up 18.9 per cent of all bankruptcies in quarter 4 2010 – a higher proportion than in recent quarters.

Businesses in the hospitality arena are experiencing the biggest difficulties with personal bankruptcies from business debts, up by 60 per cent, followed closely by wholesalers, retailers and property developers.

Atlantic Financial Management has seen a stark rise in the number of company directors and owners in serious financial problems, owing in part to the fact they have used their personal credit cards to support their business.

Kevin Still, director at Atlantic, said: “Whilst it is encouraging that the level of personal bankruptcies and IVAs are down, the real concern is the increase in failure rates of both small and medium sized companies and the knock on effect this will have.

James Falla, personal debt expert at beatmydebt.com agrees.

"Since the onset of the credit crunch, small business owners and directors have been forced to fund their businesses with personal debt and by borrowing from friends and family. As the number of small businesses which fail increases, more and more business owners will be unable to fund the debt they have taken on personally" Falla warned.

Retail industry failures

2011-05-12T12:28:00.000+01:00

The latest statistics from the Insolvency Service have shown a substantial rise in the number of retail administrations and retail company voluntary arrangements (CVAs) for the first quarter of 2011, compared with the last quarter of 2010. Administrations in retail have seen a 55% jump from 80 in the Q4 2010 to 124 in Q1 2011, while CVAs in retail have risen by 30% from 23 in Q4 2010 to 30 in Q1 2011. The overall number of administrations was up by nearly a quarter from 642 in Q4 2010 to 782 for Q1 22%.

Brian Green, restructuring partner at KPMG, commented:

“The figures show that the disparate negative economic indicators putting pressure on consumers are materialising in business failure. There is definitely a sense that the extended period of treading water, enabled by low interest rates, is coming to an end. The pain is not just being felt on the high street; the overall number of administrations went up by 22% in the first quarter of the year, compared with the last quarter of 2011. On a positive note, a discernible increase in corporate insolvency shows that lenders are starting to take definitive action on distressed situations, signalling the bottom of the market and the upturn which follows is on its way.

“The recession this time around has been different to those which have gone before in that the severe crash, typical of an economic downturn, has been avoided. While it has been shown that an economic fall can be cushioned, the underlying financial problems – such as too much debt and reduced demand - still need to be resolved and it now feels like we are reaching the end of the insolvency hiatus and activity is increasing.”

Do you agree or do you think retail insolvencies will increase even further?

Prompt Payment Code reaches major milestone

2011-04-21T15:28:00.000+01:00

More than 1000 businesses have now signed the Institute of Credit Management (ICM) led pledge for big businesses to live up to their word to pay on time by becoming signatories to the BIS backed Prompt Payment Code (PPC).

Major sponsors of the code include Barclays, RBS, HSBC, Santander and NatWest, all playing a part in a campaign designed to help increase the speed of payments to smaller companies.

Philip King, Chief Executive of the ICM, says that this is yet further proof that some of the biggest names in UK and world business are keen to be involved in a scheme that will help smaller suppliers stay afloat during these toughest of times: “With the Government’s backing this campaign is gaining real momentum and the list of high profile firms already involved, and others showing an interest is testament to that.”

The Code is hosted by the ICM on a dedicated website (www.promptpaymentcode.org.uk) and includes a facility for suppliers to raise concerns about late payers. The Code focuses on three main areas: a commitment to pay suppliers on time; to give clear guidance to suppliers; and to encourage good practice.

Two-thirds of UK businesses taking a harder line against debtors but compulsory liquidations continue to fall

2011-04-21T13:14:00.002+01:00

Nearly a quarter (23 per cent) of UK businesses have issued fewer winding up petitions over the past year, despite 66 per cent of firms claiming they have been taking a tougher approach to dealing with debtors, according to a new poll of professional credit managers undertaken by Graydon UK, a commercial credit reference company.

Latest UK Government insolvency statistics have shown that corporate liquidations continued to fall during the fourth quarter of 2010 and have remained at far lower levels than in previous recessions.

According to the research 88 per cent of credit managers are turning to alternative methods in place of presenting a winding up petition with Country Court Judgments the tool most commonly used, by over half of (55 per cent) those surveyed. The research also found that 42 per cent of businesses are contracting third party debt collectors and 39 per cent setting up formal voluntary arrangements with debtors as they step up efforts to recover money owed to them.

UK firms are still feeling the pressure

2011-04-12T14:35:00.000+01:00

The Business Rescue Service recently issued advice and warnings to troubled UK businesses as news broke that business confidence remains tremendously low with many still battling financial problems. Following high company insolvency statistics last year, the International Business Report has found that just 8% of UK businesses expressed feeling confident in the current climate. Further research for the International Business Index described half of all UK SMEs as concerned about rising costs. A substantial number also felt access to funding and capital did not meet their needs.

Research for the International Business Report was conducted throughout Europe, with the UK identified with the lowest levels of business optimism bar Spain, Ireland and Greece. Whilst 16% of respondents had expressed feeling confident last year, just half of that number had this time around. 64% did not expect to be able to increase their pricing this year. 66% did not expect to increase their staff team in the year to come. There are also concerns among firms about inadequate access to lending facilities.

"16546 firms went into liquidation last year and clearly there are lingering serious issues. The most important message to get across is to seek advice sooner rather than later. Our financial analysis of the company's status is invaluable for planning purposes. We help to identify the direction they should be taking next. We also advise on Commercial Finance. In cases where the business rescue is not possible, we are on hand to advise on the most appropriate legal remedies. We would look to preserve the underlying business wherever possible, for example, by looking at whether pre-pack Administration could be an option. "

A survey of 1,500 small businesses in the UK for the forthcoming new International Business Index also found that there were widespread concerns about company finances. 19% felt lack of access to capital and funding was likely to present the greatest obstacle to success. 40% felt access to capital and funding within the UK was not currently adequate. 50% were concerned about rising costs and 55% planned to keep carefully monitoring their financial status. 46% relied on conducting their own business research using the internet.

Government sends mixed messages on SME financial transparency

2011-03-11T11:41:00.000Z

The Government’s intention to reduce still further SMEs' statutory filing requirements in order to reduce red tape is likely to prove to be counter productive by making it harder for small businesses to secure growth funding.

Business Secretary Vince Cable announced recently that the audit threshold for filing accounts at Companies House would rise from the current £5.6 million turnover per annum to £25 million, while exempting micro businesses with up to £1 million turnover from filing their accounts at all. It is estimated by the Government that the change will save SMEs up to £400 million pounds per year.

Martin Williams, Head of External Affairs at Graydon UK, commented; “As the Department for Business, Innovation and Skills seeks to reduce statutory filing requirements, HMRC has announced that it intends to target 50,000 small businesses this year in order to examine the quality of their book keeping. Those found deficient could incur financial penalties of up to £3,000. In effect, HMRC is saying keep good records, while the government appears to be recommending the opposite in the interest of fulfilling its promise to reduce red tape.

“The Government’s intention to relieve SMEs of administrative burdens is to be applauded but in a continuing uncertain funding environment the reality is that even less financial transparency will hold SMEs back, particularly if the economic recovery weakens further.”

According to Martin Williams, during the credit crisis as economic conditions changed rapidly, banks, credit insurers and trade suppliers sought greater financial transparency from SMEs before granting them credit. In many cases, where annual accounts filed at Companies House were suspected of being out of date, lenders began to ask in increasing numbers for up to date monthly management accounts to gain a better understanding of companies financial standing before granting them credit.

Philip King, Chief Executive of the Institute of Credit Management has commented: “As well as bank lending, businesses also extend credit to one another based on the trust that comes from knowing that the company they are lending to is financially viable, and one of the essential proof points is a set of audited accounts. Far from helping small businesses, the move is more likely to damage a company’s access to credit, restricting growth and in fact adding to their costs.”

Martin Williams has added; “Small businesses need to keep a proper ongoing check of their financial situation and should not be tempted to cut financial management corners in what is an essential part of running a business.”

What now for company insolvencies?

2011-02-07T15:31:00.000Z

Administrations rose 1.4% to 642 in Q4 2010 (Q3 2010: 633). The latest figures reflect a 24.4% decrease on the same quarter a year earlier (Q4 2009: 849).

"This rise reflects the increasing pressure that many UK firms are facing. However, these figures are still way off their peak in Q1 2009, when 1,311 companies fell into administration," commented Malcolm Shierson, Partner at Grant Thornton's Recovery and Reorganisation practice.

Meanwhile, the number of companies entering liquidation saw a slight fall of 0.2% to 3,955 (Q3 2010: 3,964). The latest figures reflect a 11.3% decrease on the same quarter a year earlier (Q4 2009: 4,457).

"Whilst these figures could be said to indicate rising fortunes for the UK economy, dark clouds are looming on the horizon," continues Shierson.

"Increases in both direct and indirect taxes are starting to bite. The Government's austerity measures will increasingly impact on the private sector economy as the cuts accelerate. We are working with an increased number of distressed retailers, particularly those reliant on consumers making large discretionary purchases."

"Moreover, it is the growing probability of sustained rises in interest rates that poses the biggest threat to companies with obligations to service large debts."

R3 president, Steven Law, comments on the latest insolvency statistics:

Corporate insolvency statatistics

“The fact that corporate insolvencies in 2010 were lower than in 2009 suggests that this has been an atypical recession. HMRC’s Time to Pay scheme and the historically low interest rates have been effective at stemming the flow of insolvencies that usually occur post-recession. However it is important that businesses continue to carefully monitor their financial health as many will be affected by the implementation of recent fiscal policies.

“Businesses that rely on consumer spend will see their bottom line affected by the VAT increase as they try to absorb the tax or pass it on to their consumers which will have a negative effect on consumer-demand.

“Our research found that ten per cent of businesses describe themselves as reliant on public sector contracts and these businesses will be hit as the public sector cuts start to take effect this year. Our members believe that the construction industry will be the worst affected by the public sector cuts due to the reduction in capital spending in education and social housing.

Late payments by companies – an early indicator of weakening trading – have increased to the highest level in three years, Experian has warned.

Payments in the final quarter of 2010 bucked the slowly improving trend for the year by rocketing 16pc to an average of 25.7 days late, the information services company said.

Payments are "timely" indicators of company health and banks will scrutinise the data to inform lending decisions. They may respond by tightening credit conditions for small companies further.

In 2010 the annual rate of business insolvencies fell for the first time in two years

2011-01-26T10:24:00.000Z

In 2010 the annual rate of business insolvencies fell for the first time in two years as the financial health of UK businesses improved, according to the latest Insolvency Index from Experian®, the global information services company.

1.04 per cent of UK businesses failed in 2010, compared to 1.25 per cent in 2009, the first annual drop for two years. The total number of insolvencies decreased from 24,209 in 2009 to 19,946 in 2010 - an 18 per cent drop.

March 2010 saw the greatest number of insolvencies for the year when 0.11 per cent of the total business population failed. From March onwards, the failure rate saw a general improvement, hitting an annual low of 0.07 per cent in August and again in November.

The UK's business community finished 2010 stronger than it started the year. The average financial strength score[2] of UK businesses fell from 81.16 in January to reach its lowest point of 80.70 in May, but since recovered to reach a full year high of 81.35 in December.

Max Firth, MD of Experian PH, said: "2010 has been a period of relative stability for business insolvencies and the improving trend in the insolvency rate has been positive. This contrasts significantly to the last major recession of the early 1990s when the rate escalated over a long period and peaked even as the country came out of recession.

But what now for insolvencies? Was this just a 'blip'!

Number of builders going bust falls by 23% since recession peak

2011-01-25T18:01:00.000Z

The number of insolvencies in the construction industry has fallen by 13% over the last year to 1,470 in the last three months (Q3 2010) down from 1,685 a year ago (Q3 2009),says Wilkins Kennedy, the Top 22 accountancy firm.

Insolvencies in the construction industry have fallen by 23% from their peak of 1,913 during the recession in Q1 2009.

According to Wilkins Kennedy, economic growth has finally halted the rot in the construction sector. However, Wilkins Kennedy says that in part, construction sector insolvencies are down because so many of the weaker construction companies have already been driven to the wall over the last three years.

Wilkins Kennedy also points out that companies that still have outstanding bank loans that are coming up for renewal may struggle to roll those debts over with their banks.

Says Anthony Cork: “Banks are still recovering from the damage they suffered during the recession. They had their fingers badly burnt and are still reluctant to lend to the construction industry. Those banks are going to demand higher interest margins, higher arrangement fees and tougher covenants. It is going to hurt.”

Almost 148,000 UK companies are facing ‘significant’ or ‘critical’ financial problems

2011-01-24T13:41:00.000Z

In todays Red Flag report from Begbies Traynor almost 148,000 UK companies are facing ‘significant’ or ‘critical’ financial problems whilst those with ‘critical’ problems alone are struggling with nearly £53 billion worth of liabilities.

The report, which monitors the early warning signs of company distress, shows a 4% increase to 147,836 companies which experienced ‘significant’ or ‘critical’ financial distress in Q4 2010, compared to 141,527 companies in Q4 2009, representing the first year on year increase for seven quarters. The 147,836 companies also represented a 20% increase from 123,361 in Q3 2010, which was considerably more pronounced than the usual seasonal increase as seen this time last year (the number of companies increased by 6% from Q3 2009 to Q4 2009).

Whilst these figures are heavily weighted to the less severe category of companies facing ‘significant’ problems (representing 144,818 companies in Q4 2010), the data shows a marked increase in actions taken by trade creditors against their debtors.

The 3,018 companies experiencing ‘critical’ financial problems alone owe a total of £52.7 billion to creditors, suppliers and service providers, which compares to £57.5 billion owed by 2,943 companies in Q3 2010. The decrease in the average size of liabilities, from Q3 to Q4, indicates that a higher proportion of SMEs are suffering increases in financial distress.

Dark clouds indeed are gathering.

HMRC Business Payment Support scheme and keeping proper records

2011-01-14T09:25:00.001Z

In 2008, HMRC launched its Business Payment Support scheme, which has recently been extended for the duration of the present Parliament. Popularly known as ‘Time to Pay’, the scheme allows struggling businesses to defer tax payments.

However, recently business owners have expressed concerns that HMRC is taking a harder line despite the fact that they are willing – but unable – to pay.

Geoffrey Rogers, of Geoffrey Rogers Chartered Accountants and Tax Consultants in Plymouth, believes small firms – charged with creating jobs and driving economic growth - want to comply with their tax requirements but are not being given enough support to do so.

He said: “With banks still not lending, late payment on the up and other factors hitting cash flow, many small businesses are still facing an incredibly tough financial climate and signs that HMRC is set to pull the rug from under them are worrying.

“It’s typical that HMRC is going to fine small businesses for not keeping ‘proper records’ when it does not offer any real definition of what this means. Without clarification, and certainly without better education, in many cases, fining small businesses for poor record keeping would be like punishing a child with learning difficulties for poor reading. “Once again we are looking at the big stick being favoured instead of the carrot, which is, I’m afraid, typical of HMRC’s current approach.

2011 will see continued record levels of personal insolvency

2011-01-04T17:23:00.000Z

Personal insolvency specialists, RSM Tenon predict that annual personal insolvencies over 2010 are likely to exceed the record level set last year of 134,132.

With the upcoming increases in VAT and the inevitable rise in interest rates combined with the public sector cuts, RSM Tenon is predicting continuing record levels of personal insolvencies throughout 2011. Mark Sands, Head of Bankruptcy & Personal Insolvency at RSM Tenon, said: “As we come to the end of 2010 we are recognising that there have been record levels of personal insolvency again this year. Around 135,000 people have used personal insolvency as a last hope for dealing with their financial troubles, which is still approximately 25% higher than pre-credit crunch levels. We expect that this figure will increase to around 140,000 over 2011 with the rate set to continue until the 2012 Olympics.

Bibby Financial Services comments on banks failure to lend £30bn to UK small businesses

2010-12-22T16:47:00.000Z

Commenting on a report released yesterday by the National Audit Office, which shows banks have failed to lend a target of £30 billion to small businesses in the UK, Edward Rimmer, UK chief executive at Bibby Financial Services, says:

“The fact that there is a £30 billion discrepancy between the amount of money lent to small business in the UK and the original target set by the Government is disappointing. This situation is made worse by the determination of the banks to provide £7 billion in bonuses to senior staff over the next few weeks, despite their reluctance to lend. This may rub extra salt in the wounds of UK firms, many of which continue to struggle in the current economic climate.

“We know from our own research* that, despite the UK officially being out of recession, almost a quarter of businesses (22 per cent) feel that trading conditions are tough and they are only just surviving. This proves that there is a clear necessity for businesses to be financially supported and by depriving them of £30 billion of rightful funding, the banks have not played their part in boosting both business confidence and performance.

“We all know that access to finance is intrinsic to the survival and growth of our country’s small businesses, which are the engine room of our economy, and the Government set the business lending target for a reason to ensure this would happen. With this in mind, it is not acceptable that financial support has been withheld when it is clearly needed. For example, we have seen a 10 per cent increase in the number of firms using our invoice finance facilities in 2010. Businesses are not only recognising and trusting invoice finance as a more flexible and accessible form of funding, compared to bank overdrafts and loans, but also a more reliable one.

“Looking ahead to next year, it is vital that the Government and Vince Cable take robust action to ensure banks increase lending to UK businesses and allow them to achieve their potential to drive economic revival in this country.”

* Bibby Financial Services Business Factors Index, October 2010

Philip King raises the standing of credit management

2010-12-16T09:16:00.000Z

Institute of Credit Management (ICM) Chief Executive, Philip King, is to join the working group of the Small Business Economic Forum (SBEF), a Government initiative championed by the Minister for Business and Enterprise, Mark Prisk, MP.

The SBEF’s working group comprises select representatives from the small business, accounting, banking and credit communities. Its main aim is to ensure that small businesses can take concrete benefits to support growth from the Forum’s discussions. The first working group will meet this month.

Philip King was personally invited to join the working group by Mark Prisk, MP, following the Forum’s inaugural meeting in October 2010. At the working group meetings, Government officials, along with attendees, will set the agenda for the next Forum meeting to focus on the most pertinent issues faced by SMEs in the UK.The invitation further highlights the importance the Government sees in the credit management for aiding small business growth and economic recovery.

As Philip says: “The working group will lead new small business initiatives, and by being part of the group we have the opportunity to ensure that credit management has a key role.“It is significant to see the Government engaging with business leaders and industry figures in this manner; as a group we need to ensure it has a positive impact on small businesses.”

Lehman/ Nortel High Court judgment

2010-12-13T10:22:00.000Z

Pensions Regulator response.

Mr Justice Briggs last Friday handed down his judgment in a case brought by the administrators of 20 insolvent companies in the Lehman Brothers and Nortel groups.

The Pensions Regulator was a respondent in the case, together with the trustees of the Nortel and trustees of the Lehman Brothers UK pension schemes. These two schemes account for more than 43,000 members.

Mr Justice Briggs ruled that where a Financial Support Direction (FSD) is issued against a company after insolvency, the cost of complying with that direction is an expense in that insolvency. It therefore must be paid before any distributions to unsecured creditors.

The Pensions Regulator welcomes the judgment. It confirms an FSD is valid if issued after an insolvency event. In particular, it supports the claims of the Nortel and Lehman pension trustees in their respective administration processes.

More generally, this ruling clarifies the effect of an FSD on an insolvent target. However, it will not alter the regulator's approach to determining FSDs in any situation.

Our statutory objectives require us to protect pension scheme members and the Pension Protection Fund.

In pursuit of these objectives, we can issue an FSD to secure reasonable financial support is provided to a pension scheme. We are required by the Pensions Act 2004 to act reasonably in using these powers and to have regard to the interests of those directly affected by them.

Where schemes are left with inadequate financial support, the regulator engages with all who might have a responsibility to support the scheme to ensure, where possible and reasonable, that the interests of scheme members are protected.

Where an FSD is issued, the form and sum of any resulting financial support will be proposed by the company or companies concerned, and approved by the regulator if it is reasonable in all the circumstances.

R3 response.

Last Fridays ruling could have consequences for the UK’s business environment and highlights a conflict between insolvency and pension law. Judge Michael Briggs himself notes this decision could be ‘an impediment to the achievement of the objectives of the rescue culture’.”

“Promoting outstanding pension debts to super-priority status after the insolvency means that returns to unsecured and preferential creditors could be wiped out. Under this scenario business rescue procedures make less sense and creditors have less certainty when lending in the first place. While some pension funds may benefit, other creditors will suffer as will the value generation capacity of UK plc overall.”

John Frances, Technical Director of R3, the insolvency trade body

Retail Insolvencies

2010-12-12T11:46:00.000Z

Insolvencies across the retail sector decreased by 14% year on year during Q3, suggesting the sector is improving. However, insolvencies across all sectors decreased by 23% year on year during Q3, suggesting that Retail is not bouncing back as quickly as other sectors.

With VAT set to rise to 20% on 4 January 2011, there is growing concern from a variety of commentators that the retail sector is set to suffer a wave of administrations, closures and job losses early in the New Year.

Many retailers have introduced pre-Christmas promotions and discounts earlier than normal in an attempt to drive sales. A leading consumer research group (Nielsen) has disclosed that Christmas puddings were on promotion in September, two months earlier than 2009. In addition, the British Retail Consortium recently revealed that consumer confidence is falling due to forecast job losses in the public sector.

Anticipating that the New Year could be one of the most difficult in living memory for retailers, one of the UK’s leading business recovery firms, RSM Tenon, has launched a free helpline for retailers. The 'Retail Survival Service' aims to help worried retailers weather the storm through Q1 2011. “Larger retailers will have factored the rise in VAT into their forecasts and prepared for it as best they can. The sector has been hit hard over the last few years and businesses recognise that they should start sales earlier. There is a ‘Feast and Famine’ effect. Retailers want to capitalise on the Christmas period as they know that everyone traditionally spends at Christmas time and tightens their belts in January.

With the increase in VAT to hit early next year as well, there will be more tightening of belts than before. Q1 2011 will be a particularly hard time for retailers, hence the reason for our free service. “Retail is a crucial sector in the UK economy and has led the country out of recession in the past while playing a key role in the regeneration of towns and cities. We need to ensure retailers are fit to deal with the next few months when spending is going to contract, and costs remain static or even rise.

A voluntary company liquidation (CVL) is more beneficial than a CVA says companyliquidations.co.uk

2010-10-25T15:14:00.000+01:00

According to www.companyliquidations.co.uk a company going through a voluntary liquidation (CVL) is the most common practice used in the business marketplace to achieve a business recovery when a company has basically run its course or come to a standstill. A CVL may be the only viable option left when the business has no money or valuable assets to trade and has no feasible trading avenue but has debts to be paid and creditors owed monies.

A business cannot just go into CVL and must seek professional company insolvency advice to understand how company liquidation works and if it is the right solution to their financial problems. The alternative to liquidating your company is a Company Voluntary Arrangement (CVA), this a proposal where the company agrees to repay all the debts over a long term period, however, this is not all it promises to be.

A company that has gone into CVA trades at a credit rating of zero, thus making it virtually impossible to obtain credit terms from suppliers. This makes trading very difficult as a CVA involves long term monthly payments to repay the debt – this burdens the trading and often leads to falling into arrears. If a company (in CVA)falls into arrears for 60 days or fails to make a payment for two months can be forced into liquidation at any time during the regular 5 year CVA. Most of the time, the companies that opt for a CVA rarely run their course and fall back to square one - needing business liquidation help.

Liquidating a company works on so many different levels for a business, the main being the directors are not held liable when going into insolvency and also this process is cheap, easy and fast. Once liquidated assets can be acquired at distressed prices and payment terms can be arranged with the liquidator at an affordable rate.Thus allowing to fall out of debt and begin trading much more easier.

Small firms still feeling the squeeze on credit

2010-09-22T15:12:00.000+01:00

Business lending shrank for the fifth month running, a new report from the Bank of England has revealed.

According to the Bank's latest Trends in Lending report, net business loan repayments in July were £2.5 billion. The figure was an improvement on the £3.2 billion recorded in June, but the Bank said that lending by the UK's major credit providers has stayed moderate in August.

The picture is not uniform. Credit conditions for larger companies were showing signs of easing, but smaller businesses were still struggling to secure finance.

Although many firms have been seeking to pay down debts in the aftermath of the recession, smaller enterprises have fewer funding options open to them than their larger counterparts.

The report said: "Contacts of the Bank's network of agents noted that while credit conditions were easing for larger businesses, they remained tight for smaller firms."

New lending facilities for SMEs have remained unchanged over recent months.Despite the £200 billion of quantitative easing with which the Bank of England has been priming the economy, the broad money supply declined by 0.2 per cent in August compared with the previous month. The annual rate of growth in money was down by 1.8 per cent.

It had been hoped the quantitative easing programme would make more funds available for credit-starved small businesses.

One analyst, Howard Archer of HIS Global Insight, argued that the case was strengthening for a return to quantitative easing. He said that the Trends in Lending survey highlighted concerns that tight credit conditions are still posing a significant obstacle to economic activity, even when subdued demand for credit among businesses was taken into account.

Over half of British SME's are not expecting government help over late payment issues

2010-09-22T14:50:00.000+01:00

New research from Bacs, the organisation behind Bacs Direct Credit, has revealed that over half of British SMEs (56%) do not anticipate any assistance from the Government in tackling the late payments issue, and that the number of companies feeling the impact of late payments in June 2010 has fallen by a massive 20% in just six months.

Mike Hutchinson, head of marketing at Bacs, believes this is largely due to the individual companies' efforts and says: "It's extremely heartening to see that there are now many companies making great strides to help themselves beat the late payments cycle, by sharpening up their billing and credit control procedures."

However, there are still a massive 769,000 companies effected by late payments and Bacs' research shows that the total amount of money owed to these companies is now nearly a third more (28%) than it was six months ago (£25,000 December 2009 compared with £32,000 in June 2010), with a massive £24.6bn in total now owed to businesses across Britain.

Hutchinson continues: "There is valuable help and advice available, through schemes like the Prompt Payment Code, for companies still suffering from late payments and SMEs will be well served to draw on all available resources to find new routes forward.

"For example, with many SMEs still highly dependent on cheques, a specific piece of advice from Hutchinson is for companies to consider adopting automated payments methods. Bacs' research shows that 79% of SMEs still use cheques to pay bills and, with cheque clearing facilities due to be phased out by 2018, Hutchinson says: "SMEs should consider replacing the use of cheques with automated payment methods sooner rather than later. Automated payments offer many benefits in streamlining processes and helping cash flow, which companies can take advantage of now to help combat late payments.

"For more information about late payments and how to tackle them head on, visit www.paymedirect.co.uk where Bacs has developed a series of hints and tips for encouraging prompt payment.

About the researchBacs conducted independent market research with business to business specialists BDRC Continental. In June 2010, we conducted 477 telephone interviews with FDs, MDs, and owners of GB SMEs. The sample was representative of the GB SME audience and was representatively divided as follows, North = 126 interviews; Midlands = 107; South = 244; Manufacturing sector = 136; Distribution sector = 179; Services sector = 162.About Bacs:Founded in 1968, Bacs, the not-for-profit, membership-based industry body is owned by 15 of the leading banks and building societies in the UK and Europe.

Mill Rythe Holiday Village LLP

2010-09-17T15:30:00.000+01:00

Kirstie Provan and Mark Fry of Begbies Traynor, appointed joint administrators over Mill Rythe Holiday Village LLP (“MRH”) on 9 September 2010, are delighted to announce the successful sale of the business and assets of MRH to Mill Rythe Limited (owned by Away Resorts Limited), a non-connected party of MRH. The sale was completed shortly after MRH entered administration following an accelerated sales process run over a short time period by the proposed administrators in conjunction with BTG Corporate Finance.

Mill Rythe Limited has committed to improving the Mill Rythe Holiday Village’s existing offering and intends to make considerable improvements to the overall standards at the park, with particular attention being made to the accommodation, food quality and entertainment. It is anticipated that many of the 115 existing staff of MRH will be retained by Mill Rythe Limited to help realise this exciting new phase of the company’s development.

Commenting on the deal, the Managing Director of Away Resorts Ltd, Carl Castledine said, “We are delighted to have acquired Mill Rythe Holiday Resort which will fit into our existing portfolio of holiday park businesses very well. Over the years, thousands of families have enjoyed spending their holidays at the park and we are looking forward to welcoming them back soon. The park itself has held an excellent reputation for many years and we intend to improve upon that further.”

Kirstie Provan, Joint Administrator at Begbies Traynor said:

“We are delighted to have been able to identify a suitable buyer for Mill Rythe Holiday Village and consider that Away Resorts is a well matched owner with the ability, knowledge and skills required to take the business forward given their experience of the UK leisure market, specifically in relation to the turnaround of underperforming holiday parks. We have worked hard to ensure that the business is saved and are pleased to have achieved such a positive outcome for the business, future customers and employees as well as the local area. It is a fantastic result to have safeguarded the positions of the one thousand plus holiday makers that had outstanding bookings at Mill Rythe Holiday Village.

Advertised Winding up Petitions

2010-09-17T15:29:00.000+01:00

CELYN BUILDERS LTD
CHARLES PENTY LTD
COMPANION HOME LTD
CRYSTAL LEISURE (UK) LIMITED
DRIVE RITE SUPPORT SERVICES LIMITED
HYDRA-JECT VALVE SERVICES LTD
INTERGRATED OFFICE SOLUTIONS LIMITED
ITRS.UK.COM LIMITED
M-TECH AUTOMOTIVE LIMITED
THE NEW ISLAND PUB COMPANY LIMITED

If you require any free information on any of these email jarnold@creditman.co.uk

Up Coming Events

2010-09-17T10:47:00.000+01:00

Over the coming months there are a number of up and coming events within the industry. To keep up to date with industry news here are a few events you may wish to attend.

Introduction to Bank Financial Statements - 20/09/2010 to 21/09/2010
Public Sector Credit - 21/09/2010 to 21/09/2010
Diploma Course in Credit Management - 21/09/2010 to 21/09/2010
Leveraged Finance: Structures & Safeguards - 21/09/2010 to 22/09/2010
Credit in Europe - 21/09/2010 to 21/09/2010
Getting Started in Credit Control and Collections - 22/09/2010 to 22/09/2010
Credit Policy Workshop - 22/09/2010 to 22/09/2010
The basics of credit control - 22/09/2010 to 22/09/2010
Utilities Conference 2010 - 22/09/2010 to 22/09/2010
Scottish Legal Debt Recovery - 23/09/2010 to 23/09/2010
Becoming and Extraordinary Coach - 23/09/2010 to 23/09/2010
Congress FENCA - 23/09/2010 to 26/09/2010
Essential Telephone Collection Techniques - 23/09/2010 to 23/09/2010
Introduction to Company Accounts - 23/09/2010 to 23/09/2010
Masterclass - One day conference - 23/09/2010 to 23/09/2010
Diploma Course in Credit Management - 23/09/2010 to 23/09/2010
Tactics and Strategies for creditors in a recession when court proceedings are not the solution - 23/09/2010 to 23/09/2010
The XVII Congress FENCA - 23/09/2010 to 26/09/2010
Compelling Business Presentations - 24/09/2010 to 24/09/2010
Management of Sundry Debtors - 27/09/2010 to 27/09/2010
Trade Credit Management - 27/09/2010 to 01/10/2010

For more information visit: http://www.creditman.co.uk/uk/members/centerEvents.asp

Dishonesty claims in insolvency cases

2010-09-17T10:41:00.000+01:00

By Martin Askew of Clarke WillmottPart 1 of 2

This is the first of a two part law bite that considers Insolvency claims involving dishonesty. The general perception is that claims involving an element of dishonesty are too difficult and uncertain to pursue. This perception appears to be based on a misunderstanding of what the Court requires to make a finding of dishonesty.

The aim of these lawbites is to address two of the key hurdles in establishing 'dishonesty' in order to:* Highlight the viability of bringing these actions; and * Demonstrate the depth of expertise that Clarke Willmott can bring to such proceedings.

Introduction:

The principal claw back provisions contained within the Insolvency Act 1986 ("the Act") are a useful tool for recovering assets. However, they have limitations in terms of the requirements, in most instances, of insolvency and the applicable time limits to bring claims. They may also be subject to issues of recoverability due to genuine or contrived financial difficulty. The existence of claw back provisions is well known and there are advisors who assist to arrange matters to frustrate an IP's attempts to make a recovery.

Sections 213 and 423 of the Act, seek to widen the potential range of recovery actions and there are also common law claims for breach of duty, breach of trust and related claims that can be pursued against directors and, significantly, other third parties. These often require an element of dishonesty to be proved but have an advantage that they enable remedies to be pursued against a wider range of targets, increasing the chances of pursuing someone who will have the means to satisfy a judgment.

The standard of proof in "dishonesty" claims.

The willingness on the part of IPs to resort to such claims is, understandably, tempered by the fact that many such claims require at least an element of ‘dishonesty' to be proved. There is an expectation that reference to fraud or dishonesty raises the required standard of proof, in turn increasing the risk of failure with the attendant write-off of time and potential liability for adverse costs.

This is not, strictly speaking, correct as a claim brought by an IP remains a civil claim for financial recovery, rather than to deprive the respondent of his liberty. A civil claim against an individual or company for damages for dishonest assistance, or similar claims, does not have to be proved beyond all reasonable doubt. The relevant standard of proof remains the balance of probabilities, although it is accepted that the Court will require convincing evidence before making such a finding.

Lord Nicholls explained in Re H (Minors) [1996] AC 563 at 586 that the balance of probabilities is a flexible test:

"The balance of probability standard means that a Court is satisfied an event occurred if the Court considers that, on the evidence, the occurrence of the event was more likely than not. When assessing the probabilities the Court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that it occurred and, hence, the stronger should be the evidence before the Court concludes that the allegation is established on the balance of probability. Fraud is usually less likely than negligence… Built into the preponderance of probability standard is a generous degree of flexibility in respect of the seriousness of the allegation. Although the result is much the same, this does not mean that where a serious allegation is an issue, the standard proof required is higher. It means only that the inherent probability or improbability of an event is itself a matter to be taken into account when weighing the probability and deciding whether on balance, the event occurred. The more improbable the event, the stronger must be the evidence that it did occur before, on the balance of probability, its occurrence will be established.

"The nature of the evidence being relied upon is a material consideration in assessing the likely prospects of success.

One of the key roles of a Judge is to assess the accuracy and truth of evidence submitted by witnesses. The purpose of cross examination is to test the evidence of any witnesses. The advantage insolvency cases have is that the majority of claims are based primarily upon the available documents. This generally restricts the range of plausible explanations that a respondent can put forward to avoid liability.

Even when fraud or dishonesty is being alleged, the IP will rely on what he regards as the plain construction of the documentary evidence. Strained interpretations put forward by respondents to avoid liability will generally be unconvincing. Judges will, more likely than not, determine cases on the basis of the most natural interpretation of documentary evidence.

The legal advisor has a key role to play. A good advisor will meticulously plan the strategy for every case so as to maximise the chances of success. The strategy will commence at the very outset of the case even before the first demand letters are sent, followed through to the discovery phase and finally at trial. There is no substitute for proven experience when considering claims involving dishonesty. Knowing what evidence to seek, where to obtain it and how to procure it are essential skills to ensure that the balance of probabilities standard of proof can be satisfied.The next law bite shall consider what constitutes ‘dishonesty’ in civil claims.

A to Z of Enforcement – Part Four

2010-09-17T10:38:00.000+01:00

by David Carter of The Sheriffs Office

In this final part of our A to Z of enforcement, we cover the seizure and sale of goods, tools of the trade, “unless” orders, company voluntary arrangements and walking possession orders.

S - Seizure and sale of goodsIt is the duty of the HCEO or Certificated Bailiff to seize the goods of the debtor in order to sell (normally at auction) and raise the money to clear the debt. If sold at auction, the auctioneer will always try to get the best price for the goods, selling to the highest bidder on the day. The court may also allow for the goods seized to be sold privately rather than at public auction if it can be demonstrated that a higher price is likely to be obtained. This is called private treaty. This is usually the best option for goods that are quite specialist or where there is already an interested party.

T - Tools of the tradeTools of the trade, i.e. tools and equipment essential to work or trade, are exempt from seizure. However, these goods must be used solely by the debtor for the purposes of his or her work. For example, a commercial van that is also used by the debtor’s spouse is available for seizure. This exemption is only available to sole traders and cannot be claimed by partnerships or limited companies.

U – “Unless” orderThese are court orders specifying that a party to the proceedings must do a specific thing by a set date. If they do not, then the order stipulates what will happen next. If the party does not comply, then the next stage will happen automatically, without any further orders from the court. For example, the court may order the judgment debtor to pay in installments; if they miss an installment, then the HCEO is authorised to enter and seize goods to cover the outstanding balance owed.

V - Voluntary arrangements – how they impact on enforcementA company voluntary agreement is put in place to allow a company to continue trading while making an arrangement with its creditors. The arrangement is proposed by the company to its creditors and, once accepted by the appropriate majority, is binding on all creditors. Normally, the creditors will agree to accept a delay in payment, a smaller payment, or a combination of the two. Enforcement of writs of execution is normally suspended during a company voluntary arrangement.

W - Walking possession orderWhen leaving seized goods at the debtor’s premises, the HCEO provides a Walking Possession Agreement. This states that he has taken possession of the goods and that the goods will remain in his custody until the debt and all costs have been paid. The debtor may not sell or remove the goods, nor may he let any one else do so. The walking possession agreement also obtains the debtor’s permission to re-enter at any time and as often as they need to inspect the goods and remove them. The agreement allows the HCEO to re-enter by force if necessary.

Disclaimer: The statements and opinions expressed in this article are those of the author and do not necessarily reflect those of Sheriffs High Court Enforcement Ltd, trading as The Sheriffs Office. Sheriffs High Court Enforcement Ltd does not take any responsibility for the views of the author. The author will not be held responsible for any comments posted by visitors to this site.

Please note that this article does not constitute legal advice. The author has used his best endeavours to make this article as accurate and complete as possible, but requests that the reader be aware that the law of England and Wales frequently changes. The author strongly advises the reader to take legal advice before embarking on any enforcement action.

To view the rest of this article please visit: www.creditman.co.uk

Asset Finance - keep the blood flowing

2010-09-17T10:34:00.000+01:00

By Jeremy Rayment, Director at Menzies Corporate Finance.

It is an ironic feature of recessions that a large number of businesses survive the darkest days of the downturn, but fail just as the economy turns and we see signs of recovery. The reason that the vast majority of businesses fail is because of cashflow problems, not necessarily because they are unprofitable. When the economy emerges from recession and sales start to grow, both debtors and work in progress increase. This sucks up working capital, and if cashflow is not carefully managed, businesses can easily become over-extended. A business can be profitable, but if creditors cannot be paid it will soon cease trading.

Of course, banks have traditionally provided facilities to help businesses manage fluctuations in their cashflow, but this recession is different. It was caused by a banking crisis that itself was triggered by runaway debt. As a result, traditional bank lending is still relatively scarce, and so growing businesses may well have to look elsewhere for funding.

Go to or use the link belowhttp://menzies.co.uk/docs/Asset_Finance_-_Keep_the_Blood_Flowing_Sept10.pdf to read more...