Can factoring work?

This is taken from my newsletter. Feel free to let me know if you wish to subscribe


row-of-cc-advisors-set-up-vector-760Firstly the difference between factoring and invoice discounting should be made clear. Fundamentally factoring is where the lender manages your basic credit control whereas you retain the function under invoice discounting,

Most lenders will tell you that factoring is on the wane and some have pulled out this market altogether in recent times. In the past the function has been oversold as an easy solution to a firms credit control requirements and frequently failed to deliver. As a Credit Manager by background I have been able to pinpoint the failings.

I will not  specifically detail these today but instead will highlight where factoring can actually work for the client.

Firstly some new businesses will really not have much experience of credit control and will struggle with the procedures and organisation. Other businesses will correctly believe that having a reputable name chasing the invoices adds weight.

Many clients now run their accounts payables from remote call centres. These take time a persisitence to deal with and if your client base is largely blue chip then factoring is a reasonable option because the contact is a clear step removed from your direct contacts.

I have examples of all the above and the key has been to understand the clients needs and the nature of their clients and debtors

Surprisingly the costs of factoring are often very close to those of invice discounting too but another consideration is the quality of the credit control offered by the factoring provider.

I know where good service is offered and where it is also indifferent.

As ever, I am always available to discuss further


Categories: Uncategorized

The solution to late payments?

Late payment now costing UK businesses 67.4bn -

A lot of advice is trotted out to small businesses on how best to avoid the perennial issue of late payments from customers. Unfortunately much of this advice comes not from experienced credit managers who have the necessary experience.

This article is fairly typical in being well meaning but missing vital points. Firstly the suggestion for improving collections is ensure you have the right “accounting software”. Fine, but anyone who thinks that is all that is required is in for a nasty surprise.

The second recommendation is the old favourite the Direct Debit. How many times has this been suggested over the years and how many times does it have to be explained that clients are simply not going to give suppliers that degree of control over the timing and level of payment let alone the near unfettered access to their bank accounts, not least because of the open opportunity for fraud.

Any client experiencing colletion or cash problems should take advice from someone who will take time to understand their business. Credit management is a often complex and sensitive process with many factors to consider. Those expecting simple one stop resolutions will usually be very disappointed



Categories: Uncategorized

RBS report leaked



The FCA have invited this uopn themselves. There is quite rightly widespread disgust at their actions (or non actions) and more than a sense that this reeks of collusion.

The report has been leaked in all its glory and is apparently easily accessible online but a question remains

Given their reluctance to publish can we also trust that the contents are as far reaching as they should be?

Categories: Uncategorized

RBS and the FCA disgrace

This excellent comment piece by Ruth Davidson neatly summarises the present situation

It would appear that no adequate reason has been given by the FCA for its tardiness and clear reluctance to release their report into RBS’s gross and frankly disgusting handling of SME clients facing difficult times

The impression this gives is awful and there is obviously some explanations required. in fact a thorough interrogation would be advisable

Many of you will be or at least should be, aware of the background to this story, so I will do little more than add a couple of opinions

  1. Clearly not all the large lenders can be tarnished by the same brush but RBS are not isolated in this behaviour. The key point will always remain. If a borrower requires a personal service and strong support this is more likely to be found with smaller independent providers.
  2. I have heard too little or should I say, virtually nothing, from my contacts in the banking sector regarding the horrific treatment of these RBS clients. The trusim  is that what you dont say is as important as what you do say.
  3. Those responsible should have full force ranged against them. And I mean full force….

Frankly if I had refered a client to RBS who ended up being treated in this manner, I would be furious and ashamed at the same time

I sometimes wonder whether my role description of “broker” is adequate or accurate. Essentially we are employed by the clients to find the very best solution but the advice goes a lot further than the issue of cost. Facilty is a factor but the relationship is paramount. Furthermore the advice to my clients is ongoing on a consultative basis.

More than ever the advice given to borrowers requires the wider perspective and market knowledge


Categories: Uncategorized

The Short Firm Fraud


A good piece by the ever excellent James Hurley in the Times today. Sadly I cant link but in essence its regarding the growing incidence of the “Short firm fraud”

What is this?

The method is that false accounts are filed at companies house which produce a strong profile of a newly formed business. On that basis a decent credit rating is granted by the agencies who rely simply on the numbers and then the fraudsters are then able to obtain credit from suppliers who simply use agency ratings without examining the client in a little more detail

Clearly this is illegal but the victims of the fraud do have themselves to blame too. Simply  looking at a credit agencies rating unquestioningly is poor credit management. A quick examination of some wider detail would soon uncover whether the entity is real. Also its unusual for small firms to file glowing accounts in their first years trading,

Credit control uses the numbers as the starting point only.

Every firm should ensure that their credit management is overseen in a professional and knowledgable manner other wise the cost can be hugely expensive

Categories: Uncategorized

The FSB respond to Carillion with strong words

Many thanks to the excellent Hounslow chamber of commerce for this link. Strong words but im not at all sure what is meant by “since July 2017”. Since Carillion were sliding down a slippery slope at that time and struggling badly, the effectiveness of a Prompt Payment code would have been less than zero. Furthermore Carillion have been shocking payers for years so the date is irrelevant

It hardly helps the cause of small businesses when their self appointed representives cannot grasp the facts of the matter

FSB is calling on Government to mandate that all FTSE 350 companies sign up to a strengthened Prompt Payment Code with a new “three strikes and you’re out” rule, which specifically targets repeat offenders of late payment. The worst offending companies should be struck off and stripped of the right to be awarded public sector contracts until their practices have improved. Mike Cherry, National Chairman at the Federation of Small Businesses, said:

 “Sadly this sorry saga has laid bare the frailties of the Prompt Payment Code.  While it is fundamentally a good idea, it does not work when it is most needed – as shown with Carillion’s behaviour since July 2017.”

Companies taking advantage of small businesses for their own gains should have no right to public sector contracts. “The Small Business Commissioner needs to be given responsibility to toughen up the Prompt Payment Code.  Parliament is today announcing it will scrutinise these issues in a cross-party way, which we hope helps Government chart a new way forward to tackle poor payments.”

Categories: Uncategorized

The credit insurers after Carillion


This is an update on the credit insurance sector from my friend Martyn Locke. Subsequent to this we have found the losses were £30m and not as much as many expected but the rest of his comments ring true

Feel free to contact me if you wish to know more

This will be a very big loss to the credit Insurance market in view of the spill out to other subcontractors and suppliers. This will be a classic “domino effect” situation where the pain will be felt throughout the sector and inevitably it will be the SME segment that will be hit the hardest.

I have no numbers from the market yet and would expect something from the ABI (Association of British Insurers) fairly soon. Most of the Credit Insurers scaled down cover on Carillion in the late summer although there will be residual cover but I don’t think anyone can easily guess the knock on effect yet. Undoubtedly Credit insurance rates will increase for the Construction sector and, on the back of the recent failure of Palmer & Harvey with the knock on effects producing over £150+m losses to the market, this could be the catalyst to increase Credit Insurance premium rates across all sectors. Anybody considering whether to insure their debtor book would be well advised to secure cover quickly and also it would be advisable to test existing cover at renewal as it is inevitable that some Insurers will be effected more than others.

Categories: Uncategorized