Archive for February, 2017

Late payments to SMEs. What to do?

February 22, 2017 2 comments

Here is some interesting research from Close Brothers invoice finance. Not surprising perhaps but highlights the impact of late settlements on the whole business market

Close Brothers’ data shows 34% of all SMEs still see overdue invoices as a problem for their business – almost a fifth of these firms (17%) warn the issue is seriously affecting their ability to trade.

That is almost one in five SMEs that are frankly admitting to difficult cash flow problems. In fact I would suggest the figure is higher being an issue that many would not wish to readily divulge.

David Thomson of Close Brothers said SMEs needed better protection from government and regulators. “The UK’s record on late payments is very poor – while other countries have seen late payment rates come down as their economic fortunes have improved, the UK’s business culture seems to be one in which it is acceptable not to pay SMEs on time,” he said. “SMEs often lack the power to hold large organisations to account and need greater support from government to help them do so.”

Maybe but the correlation between late payments and the overall economy is pretty flimsy. The UK has outperformed most western economies in recent years and yet they problem is “getting worse”.

I believe that aside from strong professional credit control, there is no easy answer to this.

My advice to SMEs is to forget pie in the sky wishful “regulation” and ensure you get your basics right first.

And remember that that is far more than simply “chasing the debt”.

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Peer to peer. The future

The peer to peer lending market has blossomed over the past few years and even for very active brokers such as myself, it is a challenge to keep up with developments. Just last week a prominent player was absorbed into another lender. A development which has generated some comment from myself

The key to the on goimg success of peer to peer lenders is a combination of rates and ease of delivery. The latter is a factor which has been heavily underestimated by the established lenders who can still aact as if the are “doing a favour” to even the best placed borrower

The rates have to make sense. “Make sense” is probably a better definition than “be competitive”. The inevtiable extra cost has to be weighed against the resources the borrower is happy to spend to keep rates to the minimum.

To give an example of where a new entrant may have misjudged the market, a peer to peer bridging loan platform is offering investors a return of 12% pa. That is almost exactly the rate of the standard existing Bridge so wheres the margin? Clearly they will have to be charging a fair bit more than 12% but will they be able to offer the superior ease to compensate? In this market, I have my doubts

Too often established lenders have often fought back by attempting to rubbish the new entrants with their mouthpiece Lord Turner being particularly hysterical. They should be fighting back with products of their own rather than spreading nonsense. Think about your clients rather than the competition perhaps?

We must not forget that compeition and innovation is enormously beneficial. The lending market is unrecognisable from even just five years back and with the greater choice the role of the broker has never been more vital

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Co op. A lost opportunity

Co op bank is all but finished and this piece gives a good summary of the whys and wherefores. Being the news outlet that it is, the concentration is on the Co op banks vaunted “ethical” stance. Nothing wrong with that but he is slightly mistaken in suggesting that was the banks only defining feature

Co op made quite a big play for SME clients. Unfortunately the troubles overwhelmed them before results filtered through but it was a serious gap in the market poorly served by the major players.

They also had some very decent staff that I was lucky enough to meet but their biggest failing in this area was to not have an invoice finance offering.

In fact that was baffling


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Satago sold

I rarely talk specifically about particular lenders because relationships are always on going and frankly I am understandably selfish about current market information that I have acquired. However the news that Satago have been sold to Oxygen finance is interesting although not unexpected. It could signal more signs of consolidation in the peer to peer fintech market.

Satago’s orginal model was supplying a email credit control service. Subsequently this was to be augmented by a invoice finance package and it was all very slickly put together. However the problem as I saw was that no business is going to adequately manage its credit control with email chasing alone. In fact this claim

The addition of Satago, whose cloud-based software gives small companies the same level of credit control as a larger rival

…is complete nonsense.

Emails are by some distance the least effective method of credit control. As any credit manager will tell you, it is a frequent myth that credit control is purely a process that can be automated. To be fair to the smart people running Satago, they seemed to come to realise this

Secondly the invoice financing was seen as a service to augment the credit control. This is of course an complete reversal of the method by which factoring has been sold over the years. Its a reasonable approach but gave the impression of being an afterthought rather than the end product.

I liked the guy running Satago and he was clearly very bright but many have entered the credit control market without direct experience and found that an assumed simple solution simply does not work.

In many ways the claims made going forward and the methodology employed so far do enscapsulate some of the issues that fintechs need to address.

Credit is far more of a people driven issue than often assumed. Collections is driven by relationships. Credit is about who you are lending to as much and maybe even more than the numbers. Isolating one factor and hanging your hat purely on what is believed to be the magic bullet solution simply will not work

Need an analogy?

Imagine a premiership club buying a player. Do they spend the £30m on the basis of the last set of “assist stats” and goals scored?

Or do they get to know precisely who they are dealing with?




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Debenhams named and shamed


Shame on Debenhams on being included on a list of seedy businesses that underpay their staff. It really is quite pathetic to see a successful retailer scratch around to save a few pence from their employees pay.

Alongside being named and shamed, the government also revealed the excuses businesses came up with for not paying the right salaries. These included using tips to top up pay, docking wages to pay for a Christmas party and making it a requirement for staff to pay for their own uniforms out of salaries.

I believe that the corporate world needs a bit of a wake up call. This blog is certainly a believer in free markets but with that comes a degree of responsibility. Treat the lower paid with contempt and they have a habit of hitting back whether it be through left or right wing “populists”.  Docking pay for christmass parties (what if you didnt want to go?) is beneath contempt.

Anyone who doubts this should take a look at recent developments and perhaps also take on board Ian Kershaws riveting historical analysis

No one is suggesting that docking pay for uniforms will lead to the next Stalin or Hitler but its a drip drip drip of contempt which erodes the foundations of a system that needs to be respected and not abused


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Amazon get another tax boost


The Amazon warehouse above makes for a startling photograph which is reminiscent of the work of Andreas Gursky (who, incidentally, took the worlds most expensive photograph). Whichever way you look at it and whatever your views on Amazon, it is an extraordinary operation. It is also an operation which is shortly due to benefit from business rate changes.

Their overall saving will be £140k across all their UK warehouses. It is not a huge sum but at a time when high street businesses are being clobbered with huge increases and whilst Amazon continue to exploit any number of loopholes not available to the local retailer, it is  an extraordinarily insensitive development

The excuse may well be made by the government that such changes were “put in motion some time ago” or “are out of our hands” but this is total nonsense. It does not take much foresight to predict who the benficiaries and losers of such a rate revaluation will be and take the appropriate action.

And I think its pretty fair to say that the vast majority of the population would far rather see support for the high street business, be it a pub or bookshop, rather than a multinational that “manages” its tax affairs





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Hands off

A new client of mine is seeking a loan. They will easily qualify for the £350k they require and it’s simply a case of finding the best arrangement, although in truth that is not always entirely simple. A very welcome and decent referral but it might well be asked why they are not using their own bank?

They did try. They asked to meet someone about a loan and the said person also brought along a respresentitive to talk about invoice financing. My client did not want to talk about invoice financing. He is extremely happy with his current lender.

If I ask a plumber to come round I do not expect him to bring an electrician trying to sell me a rewiring contract.

Maybe if the plumber politely asked me if I was happy with my electrics first it would be considered but otherwise it’s an immediate “no”

When will banks learn? This is simply not the way to conduct business. The greater likelihood is that the client will be alienated.

Is that so difficult to understand?


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