It's hard enough for small businesses at the present time to obtain credit from banks and trade suppliers. so, if you're a small company or an accountant in practice with SME clients, don't take actions that only make things worse.
Many established private businesses have been tempted to register themselves as limited liability companies in the last few years. I say tempted because recent government legislation has meant that small limited companies don't have to file too much in the way of financial information at companies house anymore. The trouble is, by doing so, good credit histories can be lost!!
I came across a case the other day when Graydon was asked by a computer distributor why his credit rating had gone from 50, 000 GBP per month to 1000 GBP. We looked it up on the graydon database to discover that his partnership (which did enjoy a 50k credit rating for many years) had recently ceased to trade as a partnership and had registered as a Ltd company. Being a different legal entity,his whole excellent credit history was lost at a stroke.

OK, when he told us his tale, the key man at the business was pleased to see that Graydon could do something about it. However, it strikes me that in these circumstances it would be much better if a newly incorporated company was able to publish this simple fact at Companies House upon registration or placed maybe in the principal objects e.g "the business was established with principal objects to continue a long established business trading under the name of John Doe Computers at 16 the Mint, Reigate"

At least then the public and credit agencies could be proactive in dealing with this issue rather than left in the dark to the detriment of the business concerned. Has anyone been affected by this?

July 1, 2009 | Permalink | Comments (0)

The Tory party, in the shape of Shadow Chancellor George Osborne, appears to be planning to make it tougher for companies engaged in borrowing large sums of money in order to boost returns. He has said in a number of speeches recently that generally high levels of corporate debt should not be rewarded by the corporate tax system in this country.George has been quoted as saying "the UK is widely regarded as having the most generous tax treatment of debt interest of any major economy, so it was time to look again at the generosity of interest deductibility in our corporate tax system".

One can argue about how the Tories might end up attempting to change the tax system in order to stimulate equity investment rather than debt financing, but from a credit rating perspective, any move in this direction would be welcomed. The Graydon database of companies in the UK is awash with organisations with high borrowing ratios- a characteristic that is normally frowned upon in credit rating circles- and that was even before the impact of the credit crunch! It was bound to be the case in the UK that our heavily debt-laden companies would suffer when easy money from the banks dried up in 2008- especially in situations when the companies' business models depended on external funding.

After the election results last week, George Osborne might get his chance to put his ideas into action sooner than he thinks!

June 10, 2009 | Permalink | Comments (0)

Under pressure TV chef Gordon Ramsay has been revealing in the papers today why his company Gordon Ramsay Holdings was a bit reticent in filing financial accounts at Companies House. In March last year in this blog, I was mentioning that the world had not yet seen any financial accounts since August 2005- the reason why Companies House fined him a few thousand quid at the time. Now we discover that in the autumn of last year, his auditors KPMG were advising him to put his organisation into administration as losses mounted due to overambitious overseas expansion.

Which only goes to show that credit reference agencies like Graydon are absolutely right when they automatically withdraw good credit ratings on late filers. Experience has proven there is usually a good reason why companies don't file on time in keeping with their statutory requirements. Even as I write, Gordon Ramsay Holdings' latest filed accounts available are for the year ended 31st August 2007. OK, they're pretty historical, but at least if they'd been filed earlier, one would have seen that bank loans had scarily risen from nothing in 2005 to 3, 500, 000 GBP in 2007.

Fortunately, as Mr Ramsay admits today in the press, he and his father in law have found some millions to pump into the business to save it from going to the wall, but I'm sure not all late filing companies have directors with the same deep pockets, so credit granters beware!

June 1, 2009 | Permalink | Comments (2)

Numerous accountancy firms have been warning organisations to be on the look out for a rise in internal fraud, excessive expense claims etc as the recession builds.
If there is a feeling within any organisation that existing controls relating to expenses are inadequate, there will be some who will take advantage of the situation.Watch out for unusual claims e.g. swimming pool maintenance, moat cleaning etc- these may point to a wider abuse of the system and the need for greater controls.

Thank you,
Human Resources Dept,
H.O.C.
Westminster, SW1

May 13, 2009 | Permalink | Comments (0)

Since the last recession in the early 90's, European and subsequent UK company legislation has succeeded in whittling away at the completeness and quality of statutory financial information at Companies Registry. Small businesses, it was argued, would benefit from the removal of the administrative cost and burden of such "onerous" tasks as auditing their books each year.
Others, including the credit management profession, warned the government that these law changes may prove counter productive- in the absence of reliable data, credit lenders credit insurers etc may find it difficult to make decisions, and that could mean SMEs being starved of credit. Of course, this counter argument was not a vote winner, and fell on deaf government ears.
Now a deep recession is upon us, Credit insurers and banks are turning increasingly to up to date management accounts demanded from clients in order to make credit decisions, saying at the same time that Companies House information is insufficient for their needs. And they're not budging from this position.
To get Britain out of the economic downturn, it looks like we're going to have to enter a new era of financial transparency. According to the ABI and other bodies, SMEs will just have to get used to these requests for monthly financials that hitherto have been kept very much "in house" and bring them out into the open. If their credit lines from suppliers are improved, why not? .
I sincerely hope in future, the government, whatever its political colour, will look at the broader picture when considering any steps to degrade Companies House data still further

May 7, 2009 | Permalink | Comments (1)

The government stats released today show company insolvencies up 56% on the 1st quarter of 2008- In the first quarter of this year, the insolvent company count came to 4, 941. Back on February 6th, I forecast that insolvencies may exceed the 5000 barrier, so the real figures came in a little shy of that. I hear murmurings around that banks are beginning to lend again to businesses, and let's hope that this leads to a slowing down in the growth of failed companies. Don't forget, back in the early 90's recession, insolvencies reached a quarterly level of over 6000.
What's still extremely worrying is the impact this recession is having in our high streets. The degree to which we are spending our money in the shops is being influenced by general jitters about the economy and job security, so I expect to witness more shop closures over the coming months. Retailers of household goods and fashionwear are continuing to face serious threats to their survival. This sector of the economy was certainly not impressed with the Chancellor's budget last month, arguing it did absolutely nothing to help retailers in their present state.
I

May 1, 2009 | Permalink | Comments (0)

I read with interest in the FT on Saturday about a commercial credit agency in the UK that gave a profitable UK company a poor rating, due partly to the fact that neither director was a UK national. One of the directors of Powerchex called the action of agency Creditsafe discriminatory. I must say, i was surprised to see this in the paper. Being a Managing Director of a credit reference agency myself, i know the characteristics that make up our own scorecard, and race of Directors is certainly not present in the list .
In this case, the two Directors were Americans living in London.

I sincerely hope that as a nation, we don't send out a message to the world that there is no point their entrepreneurs coming to Britain because even if they succeed in building a strong business, they won't enjoy a good credit rating here!!!!
For more ,please see the FT article from 25th april-
http://www.ft.com/cms/s/d2d6ae06-3028-11de-88e3-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fd2d6ae06-3028-11de-88e3-00144feabdc0.html&_i_referer=

April 27, 2009 | Permalink | Comments (0)

Its comforting to see a string of better bank financial results in recent days. Citiigroup reported today their first quarterly profit in six quarters, and as a result, a little bit more confidence has come back into the stockmarkets around the world. In London, the FTSE 100 has remained above 4000 for a few days, and dare i say it, we may have seen the bottom of this extended bear market.
I said in my blog a few weeks ago that this recession will not come to an end until people have a banking system that doesn't give them the jitters. You can still be angry with our financial men and women (bloody angry in fact), that's one thing. But to have no confidence in them is another thing entirely.

We'll wait to see what's in the budget next week, but if the government comes to the aid of companies that have been constrained by the tightening up of the credit insurance market, the picture will be even rosier . There's still the lagging features of a recession yet to come (more redundancies, more liquidations etc), but the sight of banks returning to profitability has to be welcomed by all.

April 17, 2009 | Permalink | Comments (0)

The stories relating to the withdrawal of credit insurance cover on well known organisations continue to roll in. The Sunday Telegraph ran a piece this weekend relating to Euler Hermes pulling insurance cover for suppliers to the UK arm of McCains Foods. Policyholders of EH will not have any of their trade with McCains covered by insurance because the insurer has not seen later financial accounts than the 2007 statutory accounts filed at Companies Registry. Apparently, despite trying, Euler has not been able to extract more up to date info from McCain itself.
The need for up to the minute monthly management account information is growing amongst banks and credit insurers in this tough economic downturn, but even if they obtain this data, what is to say that the information is trustworthy? Management account information is not validated or audited.Its a dilemma for all credit granters , but it appears in this case that if McCain comes forward to Euler with its accounts, cover may be restored for suppliers.

April 6, 2009 | Permalink | Comments (0)

Retailers and their suppliers are in for a poor week this week. On Thursday, many retailers will be receiving their quarterly rent bills, and some will undoubtedly find it difficult to cough up the money. 3 months ago, many outlets were forced into administration when the last quarterly rental bill hit the doormat. A big worry this time around is that consumer belt tightening because of fears over jobs/recession etc coupled with some rather unpleasant snowy conditions in February will have led to a further drop in retail sales in February. The figures are due out Thursday. Experts are predicting that sales will be down 0.2 % on the month, and year on year growth will decline from 3.6% to 2.7%.
I was down in Hastings town centre last weekend, and It looked a whole lot like many other towns across the UK- plenty of activity in the charity shops, but lots of vacant sites scattered around , even in the pedestrianised centre. It will be interesting to see whether more household names bite the dust once the brown envelopes are opened!

March 24, 2009 | Permalink | Comments (0)