Interesting article on late payments

See here

Some interesting stats and the general theme is that SME’s are hitting back at late payments. Apparently 22% of SME’s will “not do business with those that have paid late in the past”

Really?

Its think its a case of they would say that wouldn’t they?

Stop press 2e2

A quick response to my blog from a someone i know well in the asset finance sector 

Just saw your blog-i saw a comapny this morning with 100% concentration with 2E2, fortunately for them the contract hasn’t yet started. I credit checked them and at 10am ish they had a rating of 3.1m and it was gone this afternoon!

So here i am saying credit check…

But of course it is down to who you credit check with and who carries out the check . 2e2 breached their banking covenants a few weeks back (just about time my client was paid) and how an agency cannot pick this up is beyond me. 

Unless they are one of the too many cheap nasty agencies who offer useless ratings

Even ignoring that, how can a business with a negative working capital of £43m with huge borrowings possibly justify that rating on a £400m turnover?

Want some more bad news?

Consumer spending in the UK is likely to stay below 2007 levels until 2017 according to Deloitte’s

Maybe so, but how do they know? Sure there will be this model and that model and yes there is probably a strong basis for believing this to be a likely outcome. However economic predictions are hardly an exact science and five years ahead is quite a big call

All the same it would be interesting (or morbid) to look at the reasoning behind this because clearly this is the driver behind the whole economy.

2e2

Another administration. Not a business you may have heard of being in it and telecoms but significant all the same. A turnover of £400m and a lot of staff at risk

http://www.bbc.co.uk/news/uk-england-berkshire-21241708

So why am i posting this seemingly unexceptional story in this day and age? Purely personal. A client of mine for whom i offer credit management consultancy were owed around £15k by @e2 late last year. Their perception was quite understandably that they were a major player and their close links with o2 offered credibility. But they weren’t paying.

Lets look at their financials. Yes they made a £13m profit in 2011 but that followed a heavy £30m loss in 2010. And the balance sheet was a disaster. Simply put, if 2012 did not boom, the banks would get twitchy.

I wont bore you with the ratios and the items in detail, but the quick answer was, we better get paid

And my client did. Right at the end of December

I will happily take the credit for saving them a bad debt and justifying my modest monthly fee, but the key lesson is that credit checking is essential not just when you first win the client but on a continuing basis.

Said it before and I will say it again until you and all your clients repeats the mantra daily

Jackson Reforms

The what you may ask? These have been in the news for some time and are due to be implemented on the 1st April. You may be vaguely aware of the outline but not the detail, so here goes

– Claims in the small claims court can now be anything up to £10k rather than existing £5k. In the future, this is intended to rise to £15k. Good news in my opinion

– Lawyers can now charge a success fee based on % of collected settled debt. Costs will have to be deemed “proportional” but not surprisingly, this isnt nailed down at this stage

– Commercial claimants will find it easier to reclaim costs from defendant (but don’t ask me for the detail just yet) but it is a good idea to firm this up in the terms and conditions

– Mediation is going to be encouraged and if the case goes further, the judge will question why it wasn’t tried. If the answer is unsatisfactory, then costs can be awarded either way

– If an offer is made to settle and then that is “beaten” when the case reaches its conclusion, then the judge can further impose “enhanced costs” and a penalty of 10% of debt against the seemingly uncooperative party. I’m not entirely sure whether this applies to just the claimant against defendant or both ways. Interesting and I will look into this

Happy to be corrected on these points, given that i picked them up from a webinar, which was informative but had slightly painful speakers

Personally speaking, I believe that these changes are positive. I am particularly taken with the last two points.

Nasty lender

A story today from the world of invoice financing…

A major lender phoned through to a recruitment agency that their facility was immediately being withdrawn. This was because they had not passed on a direct payment within a fairly tight time limit. That is a breach of course and borrowers should be be aware. However more often than not it is dealt with by a slap on the wrist. The sum involved was not substantial

Bad enough given that the directors immediately had to find £100k to pay wages to contractors

But when do you think this lovely lender chose to advise the client of this action?

7.30pm Christmas eve

Charming

Now I am not at liberty to say who the lender was but it is not a what you would diamond encrusted behaviour.

What i do know is that the account was quickly picked up by another clearing bank with a better reputation for service

Linkedin endorsements

You may well have noticed quite a few changes to linkedin this year, some of which are perhaps more welcome than others. It is certainly less easy to connect with a past contact now but that has stopped some of the spam style “connecting” (usually from some outsourcing business in India)

The other slightly odd addition is the “endorsement” I have been nicely endorsed for a few things which I am glad to be associated with and on the other hand i have been endorsed for a couple of things that are, shall we say, not my expertise

But this doesn’t worry me as much as a friend who has been

“endorsed for liquidation”

By Tony Soprano maybe?

http://www.linkedin.com/profile/view?id=46458720&trk=hb_tab_pro_top

Funding for lending. A failure?

The Governments schemes to assist small businesses through cheaper lending through the backs appears to be floundering (see here)

Why is this? Should SMEs be kicking down the doors demanding these loans? You would have thought so, but my belief is simply that very few enterprises know precisely what is available and i’m not sure the banks are rushing to let them know. I know of one major independent and respected lender that has not issued one EFG loan to date, despite it being available. And from their point of view, they highlighted some fairly understandable reasons regarding the allocation of risk why these loans were unappealing

As with the scheme to for faster bank backed payments against invoices to sluggish blue chips, you wonder if these schemes have been thoroughly thought through or perhaps little more than window dressing

Final thoughts on HMV

Although it does seem likely that some HMV stores will be rescued, we have reached the end game. My first thought is that the High Street has become a duller place with the gradual disappearance of the chain. Like Waterstones, it was always a nice diversion from a during a rather dull shopping trip. Unfortunately for many of us it became less so and the old mantra about never neglecting your core client base kicks in

Quite simply this was music and in my local Richmond store CDs were kicked to the back of the shop whilst DVDs took over. The range was diminished and even speciality areas such as Jazz and classical (genres I prefer) high profile releases were often not available.

Of course, music was diminishing in the face of downloads and there was that was an irreversible tide but a little more care and attention could have helped

There have been some fairly good points made by some who point to successful specialist retailers of music that are bucking the trend and much is made of the resurgence of Vinyl (exaggerated in my opinion since it will surely never be anything other than a tiny share of the market). But more pertinently the chain maybe lost touch with its clients. Look at how this specialist classical music cd retailer promotes itself (with excellent newsletters too)
http://www.prestoclassical.co.uk/

Even in Oxford Streets flagship branch, with excellent staff it must be said, the specialist areas were simply not utilised sufficiently. Take the headphones to listen to the new releases. Frequently they simply didn’t work and worse still, they often selected compilations of old favourites which simply were of no interest to those who were already familiar

One other point that hasn’t been covered is why the CD has been so avidly dropped by users.When they first hit the market many years ago they were promoted as indestructible. Now you only seemingly have to breath on them and they skip and jump all over the place. They still have an advantage in sound quality but in manufacturing quality, they are not up to standard.

All these are small points in the face of the download revolution but maybe just maybe, a difference could have been made

O2

This is ridiculous. And no wonder one of my clients is experiencing difficulties with this client

last month, mobile phone company O2 moved some of its suppliers on 60 or 90-day terms to 180 days – meaning companies have to wait six months for bills to be settled. Mr Orford said: “Asking any business to wait half a year for payment is not just morally questionable, it’s almost certainly damaging to those on the receiving end.”

A spokesman for O2 said at the time the payment terms were reported: “These terms have been in place in the UK since 2009 but it is possible that some suppliers, during contract renegotiation, will have seen these terms for the first time.”

I believe in a free market and that supplier client relationships must be drawn up without outside interference, but there are times when you really have to question some ethics

And how much credit do O2 allow their clients? An obvious point of course, but frankly this story warrants some publicity so that their clients clients can take their own view of this business

I certainly have mine…