Posted on 16th Feb 2010 by Alan in Uncategorized | Comments Off
Government still fails to pay on time, with one in three payments from the public sector being made late.
The FSB survey of over 10,000 small firms are still suffering late payment from Government and its agencies despite making commitments over a year ago to pay within 10 days.
The report found that local Government is likely to pay one in four invoices late, and central Government and Government agencies make one in three payments late. This is despite putting a Prompt Payment Code in place and central Government promising to pay within 10 days at the start of the recession in 2008.
In this recession hit year over half (52%) of those surveyed reported that profits had fallen in 2009; and as the recession took hold all businesses felt the pinch, however it is the small business community which bears the brunt of this practice and are leaned on by big businesses which continue to pay late. The survey shows UK central Government (31%), Government agencies (30%), EU institutions (30%), NHS (29%) and local authorities (25%) all put the pressure on too, despite promises to the contrary.
The private sector is little better with businesses recording late payment of 34% according to the survey.
Frustratingly, this had impacted of many businesses who have had to resort to using their own long and short-term finance. The survey shows that 41 per cent dipped into personal savings and 43 per cent used their overdrafts last year. Twenty one per cent used a personal credit card. This may be an indication of self-reliance as they encountered a banking sector which refused to lend.
While large firms have sufficient reserves to cope with late payments, a small business relies on payment within the agreed timescale to ensure it has a steady cash-flow.
The FSB is now urging Government to take the lead in tacking this problem by implementing a ‘Social Clause’ in national and local Government contracts. This relies on the Government stepping up its game, paying swiftly and then giving a guarantee that when the Government pays the lead contractor quickly, this is passed down the supply chain to all sub-contractors – with penalties attached for persistent non-compliance.
John Wright, National Chairman of the Federation of Small Businesses, said:
“It is shocking that after the Government put the Prompt Payment Code in place so many businesses are still being paid late. The public sector needs to take the lead in more than word alone and set an example that paying late isn’t acceptable, as this problem persists in the private sector.
“Small businesses rely on receiving payments within the timescale agreed to maintain cash-flow to ensure the business can run on a day-to-day basis. This is why the FSB is calling for the introduction of a ‘Social Clause’ in all Government contracts.
“However, this clause must have teeth, and any business found to persistently breach the terms should be fined and be warned they may lose contracts in the future. This will give small businesses confidence and go far to change the poor record of behaviour on this issue.
“Late payment is not a new issue, but it has been a particular problem in the past year and it is more important than ever that this worrying practice is brought to an end.”
Posted on 7th Oct 2009 by Alan in Late payments | Comments Off
As part on the government’s push to support businesses they have amended the trade credit insurance top-up scheme – this initiative does not remove the need for businesses to control their late payment – but should increase the number of businesses that can take advantage of it.
The scheme was introduced to help those firms struggling with late payment which often led to customers defaulting on these late payment often finding it difficult to get sufficient insurance cover to safeguard themselves.
Under the scheme, which is due to run until 31 December 2009, suppliers who have seen their insurance reduced can buy six months of government-backed insurance either to restore cover to the original level or to double the amount they are able to obtain from the private sector up to a set maximum.
Research carried out by the government has suggested that businesses are adapting to reductions in their insurance by managing their credit control more actively. Late payment continues to be a major issue with UK companies. But by adopting more rigorous credit control over late payments has reduced their dependence on the scheme.
However, a number of businesses have not been eligible but they have also needed the time to adjust to reductions in their cover. Forcing their need to control late payment rather than rely on their cover.
To provide them with some extra breathing space, the government has introduced three changes to the scheme.
Where a business has seen a reduction in its credit insurance since 1 October 2008, the scheme now provides six months top-up cover at a price of 1 per cent rather than the original 2 per cent.
The old lower limit of 20,000 has been removed and the upper limit of 1 million has been increased to 2 million.
However, vigilance on late payment and effective credit control remains the watchword for businesses.
To use the scheme, businesses should contact their trade credit insurer.
Posted on 7th Oct 2009 by Alan in Late payments | Comments Off
Late payment is no myth - more and more companies are suffering the late payment syndrome.
As late payment bites the ABI figures show that trade credit insurance remains a vital lifeline to businesses that are hit by the effects of the recession.
In Quarter 1, 2009: The total number of claims was 9,213, an increase of 48% from 6,225 in Q1 2008 and the total value of claims was 316m, an increase of 166% from 119m in Q1 2008.
Late payment and poor credit control is raising concerns among credit insurers and invoice discounters.
Trade credit insurance claims are a good indicator of what is happening in the UK economy and how late payments is affecting UK businesses. Clearly, the economic situation remains very tough and highlights the need for greater vigilance with late payment and the need to ensure effective credit control.
Posted on 7th Oct 2009 by Alan in Credit Control | Comments Off
Good credit control is at the heart of any business. We have all heard the old cry of cash flow is king – but it is true. In the current climate efficient and effective credit control will generate cash flow and keep your business afloat.
The question is – is yours or your staffs time better spent generating business than organising credit control? Many business owners do not want to let go of this essential task but is this, the best use of your time. Credit control is consuming and often needs skilled staff with the time and patience to make sure you get paid on time.
So if you want to concentrate on your core business, why not consider outsourcing your credit control. I feel sure the time saved can be more productively put to use growing your business.
Outsourced credit control will retain your identity with your client and should provide you with a much improved cash flow and lower debtor days.
With many businesses the lack of HR issues solved by outsourcing their credit control is a very attractive proposition. No need to consider holidays, maternity/paternity leave and sheer headache of management time supervising staff.
Outsourcing your credit control can range from partial outsourcing to total outsourcing. Why not speak to Alan Smith at Cashew Group they do a lot more than just Cashflow Protector.
Posted on 24th Aug 2009 by Alan in Cashflow problems | Comments Off
Trade organisations are up in arms over the withdrawal of trade credit insurance for many retailers and this is putting ever increasing pressure on retailers credit control. The British Retail Consortium (BRC) today published a survey stating more than half of large retail respondents said the reduction or withdrawal of trade credit insurance had adversely affected their business and their credit control. Of those, more than three quarters said it had led to problems with up to a quarter of their suppliers. Read the rest of this entry »
