Wholesaler Palmer & Harvey has entered administration after failing to restructure significant debts owed to suppliers. The Palmer & Harvey Group, the UK’s fifth-largest privately owned business and the country’s largest tobacco supplier, had been in takeover talks with Carlyle, the private equity firm.
But after talks broke down, directors from several Palmer & Harvey group companies made an application to London’s High Court to enter administration to help ease an increasingly unmanageable debt burden.
New figures have revealed that UK construction contractors have been hit by £700 million in cash retention losses caused by insolvencies in the past three years.
The figures, which come from a report commissioned by the Department of Business, Energy & Industrial Strategy (BEIS), have rightly been described as ‘shocking’ by the trade body the SEC Group.
The SEC claims that the brunt of those losses have been borne by small sub-contractors who, sitting further down the feeding chain, are less likely to recover monies owed to them if a client or main contractor goes bust.
It is every supplier’s worst nightmare. You have finally secured a lucrative contract with a big name global brand, giving you what feels like a sense of security and assurance for future earnings.
Then, all of a sudden, the unthinkable happens - the company goes bust. From a position of relative comfort, you now find yourself at the back of a long queue chasing unpaid invoices you may well never recover.
Depending on how reliant your business is on that one big client, you could easily find yourself in jeopardy too, unable to absorb the loss.
Taking the decision to stop supplying a client can be one of the hardest decisions any company has to take. With every piece of business so hard won it can be difficult to take a firm line with your credit control and potentially prejudice further income.
But when a customer persistently refuses to pay in full and on time, sometimes you are left with little option but to act.
Along with traffic wardens, politicians, journalists and merchant bankers, debt collection is one of those professions that has a perennial problem with its public image.
But while the unfortunate association between debt collection and burly, menacing men using dubious means to take money from the poor and unfortunate may still persist, as with many things in life, there is significant gap between perception and reality.
The Scottish government has been forced into an embarrassing admission after it was revealed that it fails to pay a fifth of invoices on time. After the late payments figures were made public by the Scottish Labour party, the ruling SNP’s Finance Secretary Derek MacKay had to confirm they were correct during a Parliamentary session at Holyrood.
Excuses, excuses… one of the most frustrating aspects of chasing unpaid invoices is dealing with the reasons customers give for paying late. When you have worked in the debt collection industry for as long as we have you can be sure we have heard some imaginative answers, along with some that are so old they were probably being used in Roman times.
The key thing to remember when faced with late payment excuses is this - your company is owed the money and you have every right to seek payment. Even when the explanations provided by the client appear to be genuine, if an agreed payment deadline has expired, you are entitled to be paid on time and in full and you have every right to pursue the payment.
The government has ordered all large businesses to disclose information on payment practices as it seeks to crackdown on late payment culture. From April, all enterprises which meet the qualifying criteria face a statutory Duty to Report information including the average time taken to pay invoices and details of payment dispute protocols.
The reports, which must be submitted twice a year, will be published online, giving suppliers access to critical information on the payment practices of potential larger clients.
A new report has confirmed the shocking impact that unpaid B2B debts have on the UK economy.
A survey of SMEs by Amicus Commercial Finance found that the average small business in the UK writes off a staggering £12,000 each year in unpaid invoices, mainly from larger customers and clients.
Taken across the entire economy, that adds up to an unbelievable £50bn a year in lost revenue - or £134 million lost to bad debt every single day.
Three quarters of the businesses surveyed said they had written off debts entirely in the past year. Amongst the worst affected group, businesses with 50 to 249 employees, a quarter of all invoices are not being paid on time, if at all.
Small and medium sized businesses need to be aware of a rising wave of frauds affecting companies big and small. The current most frequently used type of fraud is often called “Fake CEO Fraud” and we would urge all UK businesses to stay vigilant or potentially stand to lose significant sums.
For thousands of small to medium sized businesses, cash flow is probably the single most important aspect of financial management. And yet when it comes to planning and forecasting, it often receives scant attention. Indeed, many businesses unfortunately only realise how crucial cash flow is when problems occur.
We recently blogged about Crowdmix, the London-based start-up that went into administration. It’s a sad fact that many businesses fail within their first year. This can’t always be prevented: starting a business is tough. But there are certainly things you can do to avoid disaster.
Profit is important to all businesses, but don’t underestimate the importance of cash flow either.
When Tesco was exposed for its long payment delays, it exposed an ugly trend among large businesses: delay, delay and delay some more, until your supplier is on its knees. And while the supermarket provided an extreme example of this unethical practice, a shockingly large percentage of global businesses see late payment to suppliers as a “fact of life”.
Where do small businesses turn for help when they suffer due to late payment? Under new government plans, there could soon be a Small Business Conciliation Service tasked with tackling that precise problem.
That's not its official name as yet - and in fact, you could be forgiven for thinking you already know of a 'conciliation service' for small business disputes, in the form of mediation.
This Saturday December 6th is Small Business Saturday, an annual initiative to support small businesses throughout the UK, and it's not just about visiting your local independent gift shop.
Much of the focus will be on the nation's high streets and town centres, where free parking and special offers will encourage many people to finish off their Christmas shopping at small independent retailers.
Last week, the Small Business, Enterprise and Employment Act 2015 gained royal assent, meaning broadly speaking, the various measures that have already been outlined by BIS, the Insolvency Service and other government departments should be brought into law without any major changes.
What does this mean for creditors? Actually there are some broad sweeping measures, and some more specific ones, which should combine to tip the balance more fairly in the direction of creditors.
The payment practices of the UK's biggest companies have been under scrutiny for a while now, with voluntary efforts such as the Prompt Payment Code attracting criticism for being 'toothless' in terms of enforcement action.
Meanwhile though, nobody really wants to see a situation where it is mandatory to take late payers to court, or to enforce penalties and interest - after all, sometimes you might simply want to extend the deadline as a gesture of good faith to a valued customer.
The smallest firms in the UK are being paid late, in some cases by over a year, due to a lack of urgency and a sense of awkwardness about chasing clients for payment, new figures suggest.
A survey carried out by online accounts software provider FreeAgent revealed that just one in seven micro-businesses that issue invoices have never had to deal with an instance of late payment.
We all know healthy cash flow is the life blood of any small business, but when your cash flow is interrupted, survival depends on having funds in reserve - and the same is true of your customers.
So it helps to know how many small businesses out there have savings set aside 'for a rainy day', and how many would be unable to pay you if their own income was interrupted.
The figures don't make for encouraging reading - according to a report from British personal and commercial banking providers Aldermore, fewer than one in three businesses have a savings account at all.
Of those that do, 21% have less than £5,000 saved, and 7% have nothing at all.
A publicly accessible database of company directorships could soon become a reality, following the conclusion of a consultation by the Department for Business, Innovation and Skills.
The proposals outline plans for a central registry of company beneficial ownership information - including details of trustees, where relevant, and of individuals with ownership of more than 25% of the shares in a company, or the equivalent proportion of its voting rights.
Many small to medium-sized enterprises (SMEs) across the UK are effectively being forced to loan money to large firms interest-free, according to the Federation of Small Businesses.
In one of a pair of landmark reports issued since the beginning of the year, the FSB warns that late payments and unreasonable renegotiation of payment terms is taking money out of the hands of SMEs, and allowing it to languish for longer in the accounts of the nation's largest corporations.
A report from Exact, a provider of business and finance software, tallies up the costs of non-payment to UK SMEs, with some fairly alarming figures for individual examples of unpaid invoices.
A recently published Late Payments Report makes 11 recommendations that MPs believe could help small businesses to receive what they are owed more promptly from their big-business customers.
MP for Oldham East and Saddleworth Debbie Abrahams convened and chaired a cross-party parliamentary inquiry into the issue of prompt payment for small businesses, which heard evidence from several large FTSE companies, as well as affected SMEs.
We often warn that late payment can be more than just an inconvenience for many small firms, as the interruption to cash flow can put them at risk of failing to pay their own debts, bills and invoices - potentially leading to insolvency.
Now newly published figures from R3, the Association of Business Recovery Professionals, show the extent to which this is the case, with late payment cited as a major or primary factor in the failure of one in five companies in the past year.
Business overdrafts have been called the 'hidden credit crunch' following the news that while traditional bank business loans have fallen 9% in the past two years, the banks have called in 23% of overdrafts in the same period.
The figures come from a report by finance providers LDF, who say traditional bank business loans fell from £187 billion to £170 billion in the two years to March 2014, while overdrafts fell from £18.2 billion to £14.1 billion.
An unpaid invoice is a nightmare we would all prefer to avoid, but you're not necessarily just at the whim of your customers when it comes to whether or not you get paid on time.
It's also important to make sure you are invoicing properly - from the moment you take on a new customer, to how you deal with late payments - so you don't lose a single penny through your own fault and poor admin procedures.
Whether you're in business on your own, or part of a company, it's essential to protect your income - and one of the greatest areas of risk is when you extend a line of credit to a customer.
Remember, any time you carry out work, or provide goods or services, without taking payment upfront, you are effectively investing in your customers company.
The government's much-anticipated Business Bank got a kickstart of its own in the 2013 Budget, with the news that at least some of its measures are due to be introduced ahead of schedule.
But while a £300 million investment programme for SMEs was officially launched on April 10th by business secretary Vince Cable, just how far does it go to give small businesses the boost they need to grease the wheels of the UK's jammed economy?
In May 2010 Safe Collections became the first company to release a free iPhone App to help UK business owners. The app makes it easy to calculate both the late payment costs and interest on any overdue invoice.
Cash flow is king. Profit is sanity. Turnover is vanity. Cash flow is the lifeblood of every business and ensuring it flows freely is essential. Read a sample of our free guide to credit control below, authored by our very own Sid Home MICM and request a copy of the full and unabridged version free.
Many businesses involved in the retail and supply sectors find the run up to the festive period can be the businest and potentially most profitable time of the year. But it can also be one of the most difficult times of year to keep a healthy cash flow as it's not only legitimate businesses that are gearing up for a bumper holiday period; fraudsters are also busily laying the foundations for a variety of Christmas cons that could leave many already struggling companies out in the cold come January.
We regularly speak to Freelancers and Contractors who are uncertain on how to handle the credit control process after an invoice has been issued. Credit Control (occasionally called "Dunning") is no black art and it is simply a mix of common sense and a considered approach to ensuring any monies are paid in full and on time.
Below you will find an easy to understand infographic outlining a suggested process for any contractor issuing invoices on 30 day terms. If your business terms are longer or shorter then just adjust the steps below to suit your client.
Simple credit control measures could help one in ten businesses nationwide to stay operational in the face of delayed payments.
According to figures from Yorkshire Bank and its north-of-the-border equivalent, Clydesdale Bank, 10% of companies would not be able to survive if their clients took over 90 days to pay their invoices.
Business loans have been making the headlines recently, but it's not all bad news - particularly for companies that have improved debt collection over the past year or so.
There's a perception in the media that businesses need loans in order to succeed. And in some cases, yes, that's true - an injection of cash can be useful for all kinds of reasons, from setting up a new firm to undergoing expansion or a change of direction.
Credit control is an important part of running any business effectively, but for small-business owners it can have an even greater significance.
When you rely on a regular income to cover your outgoings, overheads and employee wages, any delay in payments from clients can have a severe impact on your company cash flow.
Overdue payments by British businesses have been improving steadily over the past two years, and are now settled two days faster than in 2011, according to analyst D&B.
Two years ago, the average late payment was made 17 days beyond agreed terms, a figure that has now improved to 15 days, but has as far to go again if it is to match 2006's average of just 13 days.
Now we know that Debt Collection and Debt Recovery don’t have the best reputation in business markets, this is one of the reasons we take pride in displaying a small selection of the hundreds of client testimonials we have received over the last 30 years over on our testimonials page.
Nothing usual in that you may be thinking, but have you noticed that unlike some other agencies all of our references are clearly attributable to both a named company and an individual within that company?
If you're a small-business owner and you've never heard of the Supply Chain Finance Scheme, announced today, sit down and put anything breakable well out of reach, because you're going to want to smash something pretty soon.
The SCFS is one of those initiatives that you hear about, think "how the hell did they come up with that?", and then realise it was a government idea.
Recast Late Payment Directive Consultation
Businesses that have been surviving at the edge of affordability - commonly called 'zombie businesses' for their inability to survive any further change in the health of their cashflow - could be particularly keen to see the Late Payments Directive introduced as planned.
The Department for Business, Innovation & Skills is running a consultation until October 19th on the Late Payments Directive (or European Directive 2011/7/EU, to use its proper name), which should help many small businesses to receive full payment of their invoices within 30 days - and to charge interest on top of any debts that go unpaid for longer.
Following on from our mock interview with Dodgy Dave the Debt Collector below you can find an infographic containing Nine Top Tips to avoid dodgy B2B Debt Collectors.
The tips are from the pen of our MD Sid Home. Sid is a former British Transport Police officer and has been the Managing Director of Safe Collections since the company was incorporated in 1984.
When you've been left out of pocket by a non-paying client, it's only natural that you should want to claim back what is rightfully yours.
So how do you know who to trust? We spoke to Dodgy Dave the Debt Collector - a prime example of the kind of person you probably don't want to trust with your money.
Gloomy news from the Forum of Private Business in recent weeks, as FTSE 100 companies are again being urged to abolish the late payments culture by settling their invoices on time, and banks are again being urged to lend more to cash-strapped small businesses.
In an ongoing climate of tight availability of finance in all its forms, and with outstanding invoices totaling tens of billions of pounds, it can be easy to wonder what's the point in chasing payments?
A failure to follow the 'golden rules' of credit control is leaving many SMEs facing a significant burden of payment chasing this summer, says RBS Invoice Finance.
The bank's specialist team has compiled figures showing that small firms are currently receiving payments an average of 30 days beyond the agreed deadline.
Many businesses that work with local authorities are facing a 'postcode lottery' to determine whether their accounts are settled on time, or whether they must deal with late payments from their council customers, says the Forum of Private Business.
The claim is significant because, back in 2008, the government called for councils to pay their suppliers' invoices in no more than ten days - a way to keep small businesses' cashflow healthy, as well as to ensure liquidity within the wider economy as a whole.
Following on from the news that UK PLC's are sitting on a staggering £64 billion excess of capital the latest figures from Bacs Payment Schemes show overdue payments to UK SMEs are now at a record breaking all-time high of £35.3 billion.
The data was compiled at the end of 2011, and showed a £2 billion increase in late payments in the space of just six months.
Late payments to creditors by UK PLC’s are being used to add to the working capital companies have at their disposal, according to a new report from Deloitte.
The professional services provider has analysed the working capital performance of 20,800 companies with global operations over the past five years, enabling it to compile a £64 billion estimate of excess working capital in the UK - a rise of £3 billion since 2010.
A headline-grabbing report from the Forum of Private Business and Graydon reveals that formal credit control processes are in place at fewer than half of the UK's small businesses.
The survey looked at 500 companies across the UK, and just 44% said they had formal credit control procedures to fall back on if they are not paid promptly by debtors. However, many others admitted to making use of a spur-of-the-moment approach to payments, with 16% juggling payments as they go along and 38% mixing formal credit control processes with informal payment-chasing.
Many SMEs are aware of the importance of a 'level playing field' when it comes to prompt payments - including the right to be paid on time by big brands, without them using their clout to negotiate longer terms, or their complexity as an excuse for failing to pay at all.
But when you start trading across borders, things can very quickly become even more complicated, because in other countries, even small business clients might be used to significantly different payment terms than they would be in the UK.