All this talk in the press about Government being urged to intervene on behalf of small businesses to clean up late payment culture in this country.........I'm not sure lobbyists are knocking on the right door. Government agencies like the NHS have often been criticised by their own suppliers for tardy trade payments..... DEFRA was another example that took years to finally pay contractors for the clean up operation following the foot and mouth crisis in 2002.
Now I read that the EU Ombudsman has reported on his investigation into complaints that the EU doesn't settle its own bills to suppliers. He has concluded that 300, 000 GBP was paid out to disgruntled suppliers in interest alone last year (and that's coming out of taxpayers money don't forget!). He also estimates that 22% of payments were delayed by the EU last year with an average delay of 48 days.

When government departments clean up their own act when it comes to paying bills on time, large organisations may become more concerned about their own trade payment practices. So long as Government bodies say one thing , and do another, the pressure for change won't amount to much.

July 24, 2008 | Permalink | Comments (0)

A whole host of news stories are appearing in the national press about large companies bullying their suppliers by extending payment terms......in some cases beyond 100 days. According to the Federation of Small Businesses, this " outrageous" practice is really putting a big cash flow strain on its members, at a time when they can ill afford it. This lack of corporate social conscience amongst our largest organisations has been festering for the last couple of years, but the problem has undoubtedly escalated since the credit crunch began.

One on line reader of the Times yesterday suggested that the Government impose a 2% surcharge on Corporation Tax for large companies whose DPO (Days Purchases Outstanding) registered over 60 days for example.Others are suggesting that BERR inspectors should be employed to do spot checks on large companies' finance departments, and financial penalties imposed if they find Aged Creditor lists not to their liking. I'm not sure what the answer is, but it's clear SME's are getting very agitated, and the government will do well to pay attention to their cries for help.

July 22, 2008 | Permalink | Comments (0)

I was a bit surprised to read in the Daily Telegraph on the 8th july about a Barclays Bank idea to offer free of charge credit checks to its 580, 000 corporate customers. OK, the service is only a plan and I'm not sure where they're going to find millions of free credit reports to give away, but the more interesting aspect of the piece by Richard Tyler was that he quoted Barclays as saying that small businesses didn't do credit checks on customers due largely to the cost of such services from the established agencies. First of all, i have to say Barclays is absolutely right to say that a large majority of small businesses don't avail themselves of credit reports before opening up accounts. However, it is also true that prices of credit reports have dropped considerably over the years, and there are many credit agencies offering tailor made products at low prices to small businesses nowadays. Personally, I think the reason why SME's don't use credit reports is more to do with a lack of credit management expertise within SMEs- and that's not a criticism; its a fact that most businesses under 6 million turnover don't employ professional credit managers who know all the tricks to get cash in quicker and to avoid bad debts and protracted payments. Most small businesses don't have any finance department specialists, as their businesses are too small to sustain them. Therefore, SMEs really do need a lot of help from their accountants and other external advisers, which is why i think Barclays should at least be patted on the back for trying to tackle the issue.

July 10, 2008 | Permalink | Comments (3)

BDO Stoy Hayward's recent research suggests the credit crunch is pushing up the levels of corporate fraud. Of course, as always, internal fraud makes up a large part of the overall picture. Stories reaching my ears in the last few weeks involve sales personnel "upping" their business mileage, and therefore travel expenses, thinking that artificial increases in petrol costs will be disguised by the real increases at the pumps. Others involve simple pilfering of stock from company premises.
One financial controller I spoke to on the subject who lived through the last economic downturn in the early nineties had a good piece of advice. He said that companies should organise employee training sessions on fraud policy. His belief is that this immediately demonstrates to staff that you are being vigilant. Employees, who for the most part are not "thieves" but may be feeling the economic pinch, may be dissuaded from crossing the line. Wise words, as prevention is always better than the cure.

July 3, 2008 | Permalink | Comments (0)

For some suppliers, the biggest frustration is when large "creditworthy" clients insist on holding onto their cash beyond the supplier's well established payment terms. In many cases, suppliers put up with this situation for fear of losing the business, and this puts a strain on their cash flow. One novel way of getting round this problem is offered by purchasing companies like Javelin Wholesale in London. In effect, the cash struck company makes specific purchases of it's own supplies through Javelin. Javelin pays the supplier to their terms, but allows its client to enjoy extended credit of up to 120 days. So, if you have to wait 50/60/70/80 days to get paid, at least you aren't put under pressure by your own suppliers to pay your bills on 30. One of the benefits of this new approach to safeguarding cash flow is that unlike invoice discounting, it doesn't involve security i.e. no debenture or secured charges over your assets are involved.
This idea is a new one on me, but I'd be interested in hearing of anyone's experience. What it does demonstrate is that where there is a need in the market, businesses will try to come up with new services that attempt to satisfy that demand.

July 1, 2008 | Permalink | Comments (0)