Risky Business

A blog about corporate blagging

Thu, 03 Jul 2008 16:41:45 +0000

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.

BIG Customers not paying on time?

Tue, 01 Jul 2008 11:04:02 +0000

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.

DOES THE EU's SMALL BUSINESS ACT ADDRESS THE BIG ISSUES?

Fri, 27 Jun 2008 11:57:36 +0000

The long awaited EU Small Business Act was unveiled this week, which hopefully will persuade member state governments to make more efforts in putting small businesses first, thus helping to create a better environment for small businesses to prosper. However, some groups have already criticised the lack of effort from European lawmakers in coming to terms with the perennial problem of late trade payments. This was an area that was supposed to be tackled more seriously in this new ACT, but wasn't.
According to a recent survey undertaken by the small business champions the Forum of Private Business, 81% of respondents said that trade payments had deteriorated in the last year, and more worryingly, 33% said that because of this issue, they were in danger of going into administration, through lack of cash flow. Helping small businesses by reducing administrative burden, providing better access to finance and public procurement are all to be welcomed, but the big issue of delayed payments remains to be tackled by lawmakers both here in the UK and in Brussels, judging by this latest piece of legislation.

Supermarkets or High Street Retailers- where's the difference?

Thu, 26 Jun 2008 11:52:35 +0000

I've recently received an invitation to a symposium in July to discuss the Competition Commission's recent proposal to set up a Grocery Ombudsman to check on the affairs of the big supermarkets. After its inquiry into the grocery trade, it was the CC's view that some large supermarkets are responsible for transferring " excessive risk and unexpected costs" on to their suppliers.
It should be interesting to find out how Peter Freeman, Chairman of the CC and Keynote Speaker at the symposium, is going about setting up a new Supermarket Code of Practice and the Grocery Ombudsman position itself.
However, I read in the Sunday Times last week about Debenhams extending its payments to suppliers to 96 days amid claims that trading conditions "are deteriorating". Debenhams join B&Q, Boots Alliance and Selfridges among other high street giants, in a list of companies that believe it's perfectly OK to pass on any pain to suppliers in order to safeguard their own profit margins. In this respect, there doesn't seem to be much difference between the supermarket chains and other high street outlets. Maybe the supermarkets are right to moan about the fact they are facing the introduction of an Ombudsman to scrutinise their dealings with suppliers, whilst other retailers down the road from them are free to adopt similar tactics without fear of reprisal from the authoriies. Who said life was fair? Ask any trade supplier!

CREDIT CRUNCH- the calm before the storm?

Wed, 18 Jun 2008 14:51:01 +0000

Credit people have been talking about the credit crunch and it's potential fallout since last autumn, but despite all the gloom and doom merchants around, the impact is still not being felt in the general market to the level that was anticipated. Okay, credit insurers are reporting that claims are going up, and so is debt collection work, but any substantial increase in liquidations figures are conspicuous by their absence so far. This was also confirmed this morning when I spoke to one of the leading insolvency practitioners- any significant increase in workload hasn't come through yet.

Let's hope this is all good news, but most credit experts are sticking to their assessment that we may all be in for a period of more difficult trading and risk conditions lasting between 12 and 24 months. Are we therefore experiencing the calm before the storm?

CREDIT STRATEGIES FOR TURBULENT TIMES

Fri, 13 Jun 2008 13:10:47 +0000

Since the last two big economic downturns in the Uk (the industry led "Thatcher" recession of 1979/81 and the consumer led "ERM" recession of the early nineties,) the stable ,relatively calm economic waters have been good to UK credit managers.

Due largely to the computerisation of bulk credit data in the nineties, the barriers of entry into the credit information market have come down, and as a result, credit managers have more choice of agency at far lower prices.Some agencies offer very low prices based on the regurgitation of public record data from the CRO with an appended credit rating. And in the prevailing calm conditions in the last fifteen years, whatever agency was selected, the predictive qualites of credit reports were perceived by the market as "much of a muchness."

The predictive quality of credit reports didn't even seem to be affected by the deterioration in the quality of financials filed at Companies House. As I write, 85% of accounts at CRO are abbreviated and unaudited. To make matters worse, criminals have read the disclaimer on the CRO website saying that accounts lodged there are received "in good faith" and are not validated or verified, and have bombarded Companies House with fictitious documents in order to perpetrate frauds.

The new breed of credit manager has been brought up on this diet, and many have no appreciation of what past generations of credit managers saw in their credit reports, unless of course they continue to use the services of traditional agencies like D&B, Graydon and Experian who still add trade payment data, edit trade magazines, and interview companies to add value to their products.

In turbulent times, a credit report must surely be more than a revamped Companies House image document with an automatic rating attached? The low cost, no added value credit report has bloomed in "fair weather" conditions over recent years, but will it do the job in bleaker conditions like the ones we are facing now?

Identity theft- A case of demography or geography?

Tue, 03 Jun 2008 10:26:26 +0000

At least us Brits are not alone in facing an identity theft epidemic. In the USA, it's the country's fastest growing crime. The Federal Trade Commission in the States undertakes surveys each year and tries to understand why and how these crimes are being committed. On the surface, what might seem strange is that Arizona is the identity theft hot spot state in the union, followed by California, Texas, Nevada and Florida.

Commentators, particularly from the Right, point to the fact that these are all border states, where illegal immigration may be fuelling the theft of US citizens' identities. Others suggest Arizona is perched on top of the list because it has a large older population more easily fooled by pfishers and other identity thieves. It has also been suggested that Arizona has a high incidence of methamphetimine users, and that identity theft is a popular "non violent" way to finance drug habits.

London and the Southeast see almost 50% of identity theft crimes in the UK, whereas Northern Ireland sees only 1% of the UK total. Is illegal immigration the big factor here? Or illicit drugs? Is anyone in the UK doing similar work to the FTC in the States to try to understand the causes, or are we content just to record the statistics?

MPs scrutinise Companies House

Mon, 02 Jun 2008 12:05:57 +0000

Unhappy with some of the user complaints about activity at Companies House and delays in implementing aspects of the new Companies Act , a BERR committee of MPs met up recently with senior executives at the CRO in an oral evidence session. MPs heard that the public fears over false information being filed at Companies Registry by "would be" fraudsters and the like are justified, in that very little information coming into Companies House is actually verfied or validated by staff there. The CRO chief executive complained that too few companies had taken up the system of electronic filing of director changes etc called "PROOF", which would substantially cut down on the incidences of identity theft at CRO. When the BERR commitee asked whether making the system compulsory would greatly reduce the identity theft problem, the CRO said yes. One committee member commented " I feel a strong recommendation to Government coming here". Personally, I would back such a move because in this instance, i totally endorse the CRO's view that electronic filing of such changes would make it more difficult for opportunist criminals to fiddle with public records.

Phishers move up the food chain

Mon, 12 May 2008 12:10:47 +0000

Internet fraudsters (phishers) who try to trick online users into passing over bank/creditcard/other private details over the web are moving up the food chain and attacking high net worth individuals. More sophisticated individuals surely won't get caught out by these scams, I hear you ask.

Well, last month, thousands of senior US executives were targetted with e-mails that looked like official court summonses from a court in San Diego. They were told to click on a link to download the full court summons. Anyone who followed the link unwittingly downloaded and installed key logging software that recorded their passwords and computer use and sent it to the phishers. A second piece of software enabled the gang to control the computer remotely. Hundreds were caught out.This scam led the New York Times to coin a new phrase for phishers who target upmarket individuals- "whalers"!

The message is clear. Organisations can't rely totally on IT guys to combat Internet scams but must train all staff (even senior executives!)to be aware of the technological, commercial and legal risks and need to develop programmes to stop phishers from being successful.

credit assessing small businesses can be easier

Thu, 08 May 2008 12:31:09 +0000

Buying credit reports on small businesses often leads to buyer frustration, as the level of available data on small private firms is "limited" so to speak. Some companies, though, have found a way of making credit decisioning easier on this type of business- they do an additional consumer credit check on the business owner at his home address.

I was informed by a Graydon customer the other day that he had bought a business report from Graydon showing a clear credit picture, then bought a consumer report via Graydon's consumer gateway on the man that owned the business and discovered 10 CCJs against the person registered at his home address. Result- an easier decision!

To do this , however, credit departments must ensure that their credit application forms include a request for permission to check out the individual behind the business in keeping with Data Protection law.

SMEs must recognise early warning signs of bad debt

Tue, 06 May 2008 12:07:11 +0000

Research in the credit arena continues to point to the fact that SMEs should be doing more to protect themselves from bad debt, and protracted payments from customers. I read some research over the weekend suggesting that 50% of SMEs continued to deliver goods on credit terms to debtors when unpaid debts were already over 90 days old. Secondly, only 3% of the respondents in this study said they turned to a debt collection agency for help, but when they did, debts were already on average 11 months old. The interesting aspect of this research was that it was looking into trade supplier habits involving companies that had gone bust leaving those suppliers with write offs. Once again, it looks as if there is an imbalance between SME enthusiasm for chasing sales revenue, and unwillingness or lack of expertise in making sure those sales are paid for.

Sour grapes from the Supermarkets?

Thu, 01 May 2008 16:51:27 +0000

Just hours after the publication of the Competition Commission's final report into the Grocery trade, some supermarkets were beginning to bleat on about how the costs of organising and paying for an Ombudsman to police activities in the sector would lead to increased prices in the shops for the consumer. However, the supermarkets already accept that some things do have to get in the way of delivering lower and lower prices to end users. For instance, I'm sure child labour in overseas sweatshops would help to reduce prices of goods on the shelves, but no one, including the supermarkets, accepts this as an ethical way of trading. The Ombudsman has been recommended by the CC because it thinks the supermarkets have continually and unfairly transferred excessive risks and unexpected costs on to their suppliers. Shouldn't this be seen by the supermarkets as unethical trade practice too? A touch of sour grapes methinks.

OFT Tucks into Groceries again

Mon, 28 Apr 2008 15:48:46 +0000

The OFT doesn't seem to be able to leave the Supermarket giants alone lately! This week, we should see the publication of the final recommendations from the Competition Commission in to the Grocery Trade ( read supermarket chains), after the OFT referred the matter to the CC in 2006. Will an Ombudsman for the trade be recommended or not? That's one of the big questions that will soon be answered. Then last week, almost in preparation for this one, we learn that the OFT has launched an investigation into cigarette and toiletries price fixing amongst the large supermarket chains and the cigarette manufacturers. At this rate,Tesco and the like will soon be developing a serious bunker mentality. Why is it ,they ask, we do everything we can to help consumers yet get all this criticism? Any suggested answers from anyone?

Mon, 28 Apr 2008 14:14:00 +0000

UK Company Asks "Who Am I?" following identity hijack

Wed, 16 Apr 2008 10:39:05 +0000

Companies House continues to warn companies about the need to be vigilant concerning identity theft. However, company hijackings of bona fide companies continue apace- I've just been told by Graydon colleagues of one Middlesborough based company that was shocked to discover its registered office had changed without consent, its directors had resigned and been replaced with new ones , and a set of fictitious 2006 accounts had been filed at Companies House too to complete the scam.

I bet the real director was wondering whether he had suddenly lost his marbles or was suffering from a severe case of amnesia- either way, it just shows what can happen to a corporate identity if you don't make regular checks of your file at Companies Registry.