Well its taken a fair while, but what started as the Competition Commission's investigation into the activity of supermarket giants back in 2006 is soon to end with a new code of practice from feb 4th, to be enforced by an independent Ombudsman- much to the chagrin of the giant retailers themselves of course.
During January, Kevin Brennan, the Consumer affairs minister, announced that he had decided to take on board the recommendation of the CC, given to him last summer, that an independent Ombudsman was necessary to ensure the new "fairer " code of practice was adhered to by the supermarkets. The actual appointment of an Ombudsman may still take a few months, but the move has been welcomed by all kinds of groups keen to see supermarket power over its trade suppliers controlled.

Supermarket spokesmen have already pointed out that the cost of the Ombudsman will probably mean higher prices on the shelves. Maybe this is true, but it must also be true that consumer prices have been kept low in the past because of unchecked supermarket purchasing power. If the Competition Commission has deemed that some trade practices in the grocery trade have given the giant retailers an unfair competitive edge over smaller rivals, whilst hurting the cash flow and profitability of trade suppliers, aren't higher prices worth paying to put things right? After all, i'm sure shelf prices would be a lot lower if supermarkets stole goods from suppliers, but no one in their right mind, including the supermarkets, would condone that practice. Correct? I'm sure supermarkets, suppliers, Government and consumers all want to see fairness in the way we do business in this country. It makes us all feel better about ourselves!

February 3, 2010 | Permalink | Comments (2)

Some say they are.....A lot say they aren't..... but the debate as to whether banks are lending to SMEs during this ongoing economic crisis rumbles on. There must be a whole load of reasons why some SMEs succeed in persuading banks that they are worth the punt, and then again, a number of reasons why banks turn down loan applications.
I was down in Westminster the other day talking to a Trade Credit insider at the government's BIS department to learn of one big reason that prevents banks from lending. Apparently, from evidence that the banks have shown to BIS officials, its clear that many applications from SMEs are woefully inadequate. Which raises a big question in my mind...... are SMEs trying to obtain advice from accountants on how to pitch for a business loan i.e. what should a loan application be supported with (management accounts, cash flow forecast, breakeven analysis, yearly business plan?)
If SMEs aren't asking for this advice from their financial advisers, they should be. Many business owners are good at what they do on a day to day basis when running their businesses, but pitching to a bank for a loan in this economic climate calls for a degree of expertise that I would guess sits outside the average SME owner's comfort zone. Perhaps accountants should come forward a bit more to proactively market this type of service to the SME community, as clearly, there is a gap in the market that needs filling. Maybe some accountants are helping their small clients obtain bank support by offering advice on shaping a loan application. If you do, I'd like to hear from you because i reckon you're the exception to the rule based on the evidence I can see.

February 2, 2010 | Permalink | Comments (6)

As a credit information man, I'm always trying to persuade businesses that good credit scores can directly impact their cash flow positions, so i was particularly pleased to hear yet more clear evidence yesterday from a bunch of credit managers as to how this can happen, in order to back up my perennial arguments on the subject.

Many credit departments nowadays are buying in software packages that help drive cash collection actions. Yesterday i heard from credit managers who allocate colour codes (green, amber , and red) to all existing credit accounts on their sales ledgers depending on the credit scores of their clients. If payments become overdue from a "green" client (one who has a good credit rating), some leeway is given before chasing up strenuously , whilst if payments are beyond due date from a "red" client, they're chased immediately for the money. thus proving that companies with good credit scores can obtain extended credit far more easily than poor rated ones. if the "green" client has 15 or so more days in which to pay because the supplier has less concern about a bad debt arising, you can see how less pressure is brought to bear on his cash flow position, particularly if this was repeated many times over by different suppliers.
Companies should understand much more about how their credit ratings are produced by agencies like Graydon and D&B, and what they can do to try and improve their own credit ratings. As an industry, the credit reference fraternity is realising that its got to be more transparent about how it goes about its business, so expect some useful material on the subject coming into the market soon- that's a promise!

January 28, 2010 | Permalink | Comments (0)

These are indeed troubling times for football fans. Diehards no longer have to fret about league results or the threat of relegation- they're more anxious nowadays about the financial situations of their beloved but debt laden clubs.
Yesterday came sad news for Crystal Palace fans. Eagles fans saw their club go into administration when cash strapped owners couldn't find the money to pay off the HMRC.
HMRC, the biggest petitioners for Winding ups in the courts due to unpaid tax bills, can do more damage to the reputation of the football league as they petition for the winding up of four further clubs- Notts County, Cardiff City, Portsmouth and Accrington Stanley.
Its a sad state of affairs when even the most famous clubs in the land like Manchester United and West Ham are up to their ears in debt, causing all kinds of sleepless nights for their supporters despite the fact that affairs on the pitch are far from a major concern.
I don't blame HMRC though- company directors that run football clubs should act the same as any other company director in the country no matter what line of business they're in - with responsibility and with an eye on the future. If football directors could achieve this- now that would be a result worth celebrating !

January 27, 2010 | Permalink | Comments (1)

Over a year ago, cash strapped small businesses were given a pledge by Lord Mandelson stating that Government departments would pay trade invoices within 10 days. Research recently carried out by Graydon amongst 320 companies supplying government departments says that 98% fail to get their money within the promised time frame. Worse, some 60 odd percent say they are paid later than 30 days after the invoice date.
Was this government pledge another example of government rhetoric aimed at calming the nerves of the business nation in the midst of a severe recession, without any real hope of proving deliverable?
Some would argue that this policy follows in the footsteps of the Top up Credit Insurance scheme and the Enterprise Finance guarantee Scheme- other "Made in Recessionary UK" products that really failed to deliver what they were meant to, to help the country through the downturn.
All these government initiatives, whilst laudable in conceptual terms, have clearly demonstrated that government machinery does not readily respond to the demands made of it by its bosses, and brings to mind the rather amusing antics of the senior civil servants in that never to be forgotten comedy series "Yes Minister". The PM and his cabinet colleagues may think they're in charge, but who really pulls the strings of power in this country of ours?

January 18, 2010 | Permalink | Comments (1)

My colleague blogger "Insider" wrote yesterday about the growing menace of fraud. No doubt, things get worse when people get desperate in a recession.
However, there are some underlying problems facing our society when one looks at the crime of fraud. All criminals are opportunists, and those ready to commit fraud are no exception. Criminals also believe that they will get away with their misdemeanors. The problem with fraud is that from a police perspective, it is not a high priority crime. I'm sure the public would be up in arms if the Constabulary announced they were taking officers off anti terrorism and knife crime in order to fight fraud. Commercial fraud, much of it "white collar" crime, seems to be seen by many policemen as victimless i.e. if companies lose money, they can just write it off as a bad debt etc.
If the criminal fraternity or desperate "recession hit" business people think the police aren't that interested in pursuing fraudsters, the crime is made more attractive to perpetrate.
It's also true that fraud convictions are notoriously difficult to obtain in the courts. A personal experience gives an insight into why this could be.
I was once invited by the authorities to do my duty as a juror at Knightsbridge Crown Court. On one morning, I was asked to come into a courtroom, where the judge explained we would be asked to become jurors in a complicated fraud case that might last four months. Business executives on the jury like me soon put their hands up to ask to be excused from the case as they couldn't afford to be away from their jobs for that long. Several of us left the room excused from duty, leaving a couple of housewives, two london transport workers, and a shop assistant still there from the original pool of jurors. i guess the process continued when the next batch of potential jurors was hauled in to the courtroom. Get my point?

January 12, 2010 | Permalink | Comments (0)

It is an undeniable fact that in a recession, parents seem to take on board the economic environment and postpone having babies until financial circumstances improve. In America for instance, statistics show that the country's birth rate dropped by 2% in 2008- the worst decline in four decades.
However, recent figures from the UK Government Office for National Statisitics, published on 30th november 2009, also point to the fact that company births have been impacted by the recession. In 2008, new company start ups fell 3.7% compared to 2007. ( down from 281, 000 to 270, 000). Mind you, these figures shouldn't come as much of a surprise. Many entrepreneurs act very much like "wannabe parents" in as much as if they think the economic conditions are not right to help their "babies" develop healthily through the early years, they are very likely to delay the birth until favourable conditions return.
Quite understandably, economic commentators concentrate very heavily on insolvency stats during a recession to see how bad things might be; what I'm saying is that there is another side to the coin. When company start up numbers begin to climb again, it will be a sure sign that on the ground, optimism among business people is on the up again.

January 11, 2010 | Permalink | Comments (0)

Companies who have taken advantage of HMRC's Business Payments Support Service during the recession, which allowed them to defer tax payments in order to stave off insolvency, had better be in much better shape in 2010.
Sorry to put a dampener on peoples' Christmas spirits, but I suspect the tradtional increase in insolvencies seen coming out of a recession will be exacerbated in 2010 when the Taxman comes a calling looking for repayment of deferred tax. Some companies who are still suffering in the economic downturn may not be able to afford the bill.
During the recession, the HMRC agreed deferred payments with over 200, 000 companies. But this empathy with cash strapped organisations can't continue forever, particularly with the government having such a big hole in its coffers. The other thing we should not overlook is that the Taxman is on record as the biggest Petitioner for Winding Up companies in the Courts (for non payment of tax debts.)
I reckon therefore that all the signs point to the HMRC taking a firmer line in collecting what is owed to them in 2010, and those companies still left struggling to make ends meet after 2 years of economic downturn are likely to perish.
For many, the HMRC's deferred tax scheme has been a real life saver- for others I fear, it has simply delayed an inevitable demise.

December 18, 2009 | Permalink | Comments (6)

"Insufficient security " has been given as the biggest reason behind Banks' rejection of loan requests by SMEs, according to research soon to be published by Graydon and the Forum For Private Business. According to around 750 respondents in the research, Banks used this as the excuse for turning down facilities in nearly 42% of cases. It seems a little strange to me that lots of businesses approached their banks looking for money without the possibility of putting up some collateral to cover the amount, because it is a well known fact that banks don't lend money too often without that security in place.

Speculating a little, I suspect this situation may have come about due to falling property prices. In the good times and in a rising house market, there would be much more scope for owners of businesses to increase their mortgage on their houses as security against business loans, but in the falling housing market of 2008/2009, that option evaporated in many cases.
Whatever, other aspects of the research to be published in the New Year points to a renewed optimism amongst the SME community that growth is just around the corner. Let's hope that it is optimism built on solid foundations, rather than naivity and wishful thinking.

December 15, 2009 | Permalink | Comments (1)

Should I be more interested in Income Tax avoidance schemes or looking after the longer term solvency of my business? Some SME owners are facing up to this issue before next April's hike in the higher rate of income tax to 50% comes into play .

Tax partners at accountancy firms are reporting that many business owners are contemplating paying out bumper dividends to family members prior to the personal income tax rise in April next year as dividends are taxed at much lower rates. But are they only contemplating this action as a result of advice accountants are giving them?
Some tax experts are openly saying that this type of move by business owners is very legitimate and understandable tax planning....... but in the middle of a recession, are some accountants sending out the wrong message to small firms?

I read an alternative view in the Daily Telegraph in early November when Richard Mannion, national tax director of Smith & Williamson, stated that many companies recovering from the recession may well be advised to reduce dividend payments to protect their reserves. Reducing shareholders equity by paying larger than normal dividends out of retained profits will not do wonders for long term solvency- nor, might I add as a credit agency man, will it do much for company credit ratings, at a time when SMEs in particular are finding it difficult to obtain credit and finance.

I guess at the end of the day, all business owners have choices. After all, if you own and run a business, you can pay yourself what you like. You are also free to try and minimise your tax bill. My point is that accountants should at least advise business owners that there are consequences to any business decision, and that decisions should be taken on an informed basis. What i don't want to hear next year is a bunch of small business owners who've paid out big dividends before April 2010 bleating on about their inability to get credit from credit granters. You pays your money.. and takes your choice!

November 10, 2009 | Permalink | Comments (0)