Licence Revoked…
The Licence Factory has called in administrators.
STOCKPORT-based branded goods importer The Licence Factory has called in administrators.
The company, which produced ranges of watches, bags and accessories, has ceased trading after its main funder GE Commercial Finance appointed RSM Tenon as administrators
Full Story at The Business Desk
Another one bites the dust…
LIFE & Style Retail, the company set up last year to buy the business and assets of the former Ethel Austin chain, has been placed into administration, RSM Tenon were appointed as administrators of the 90-strong chain of stores last night.
It is the third time in as many years that the business has been placed into administration.
Full story at The Business Desk
Sweet Dreams for Silentnight
Bed manufacturer Silentnight has had its future secured after HIG Capital, a private equity firm, stepped in to buy the business from administrators, KPMG.
The company had been seeking approval for a Company Voluntary Arrangement (CVA) in a bid to reduce a £100m pensions liability after its bank withdrew its funding earlier this year. The proposal involved Silentnight paying 65p in the £1 on its outstanding debt.
Full story at The Business Desk
Bibby Growth
ASSET-based lender Bibby Financial Services has reported an 84% leap in pre-tax profits to £34.3m.
The business provides invoice finance to 3,800 firms in the UK, said the figure for 2010 was helped by a 25% growth in new business.
Read the full article at The Business Desk
Tags: Cash Flow, invoice finance
Bye bye Focus DIY?
****UPDATE****
Acordoing to The Business Desk (see link below) Focus will go into Administration today (5th May)
TROUBLED North West retailer Focus DIY is set to go into administration after breaching its banking covenants.
The Crewe based company went through a CVA process in 2009 said it intends to appoint Ernst & Young as Administrators – Story from The Business Desk
A brief look at the last filed accounts suggest that there will be a significant number of suppliers owed money.
Setting up a system to track large customers is easy and relatively cheap and can really help when assesing the heath of a customers business.
Give us a call today and we can let you know what can be done to keep you better informed and reduce the risk of you being caught.
Don’t get caught, Call; 020 7100 5978 ask for details of ledger monitoring. If you prefer email: info@tak-outsourcing.com
Silentnight CVA a Nightmare for suppliers?
Matress Manufacturer Silentnight has applied for a Company Voluntary Arrangement (CVA) in a bid to reduce its debt burden. The company, which has been trading since 1946 employs more than 1,250 people, said that it was seeking a CVA in a bid to reduce the liabilities it owes following a take-private deal completed in 2003 and to address its widening pensions deficit. Read more at The Business Desk
This has got to be a nightmare scenario for many businesses. One of your largest customers applies for a CVA or goes into administration. The money you had been hoping to collect is just gone and you are left staring into the abyss. There is always a ripple effect from these events, just get hold of a creditors list and in some instances you will be looking at a list of shattered dreams.
However, before getting the Kleenex out, bear in mind that companies rarely go bust over night. There are often signs that can be read by a good Credit Manager that can help you avoid getting burnt.
Review credit limits and credit with all customers regularly.
Record and compare payment vs. terms over time to monitor any changes
If you have a turnover that justifies it, invest in some automated monitoring (take a look at Credit Guardian (Download it here for FREE)
Lastly and most importantly have a proactive credit contol process in place, gather intelligence and act upon it.
If you are worried and need a hand, or would just like a chat, get in touch all you need to do is Click
Tags: Bad Debt, Credit Control, CVA, Debt
Why do people fall in love with old invoices?
There is something I don’t understand.
Why are businesses (people) so willing to provide goods and services on credit yet so reluctant to collect the money? Why do people get so attached to old unpaid invoices that they just don’t want to let them go?
We have recently run a campaign for our Debt Recovery service for which we had an overwhelming response. Initially we were pleased, however when we got into the detail, the picture that emerged was less sunny.
It would appear that businesses, or more accurately people within them, hang on to old invoices in the hope that they will be paid eventually, despite what their best instincts are telling them. It seems that people don’t want to upset their customers by asking them for payment or just don’t want to take action that confirms a mistake was made when extending credit to a particular customer.
This I just can’t understand, particularly when the impact is so severe.
First definition of a “customer” from Google:
“A person, company, or other entity which buys goods and services produced by another person, company, or other entity”
And a definition of “buy”:
“To obtain ownership in exchange for money or value.”
So to be a considered a customer the whole cycle has to be complete, you give your prospective customer something of value and in return they give you something of value, usually money.
Business does rely upon a certain amount of credit however one should extend credit with caution. Giving credit on trust alone is a surprisingly regular occurrence. One of our recent contacts, a company selling CCTV equipment had “…given credit because [the “customer”] could not get it elsewhere. Just take a moment to re-read and ask yourself if the likely outcome was as predictable as we thought.
The impact of this decision;
- £5k of goods not paid for = £5k off the bottom line.
- To cover the loss £25,000 of sales need to be made at 20% margin
- The business turns over £150k so that is equivalent to 2 months revenue.
In this case I think any sane person would say credit should not have been given in the first place. However it seems when it comes to extending credit then asking for the money rational thought is sometimes abandoned. In this case there were other difficulties; the contract was unclear, so the business didn’t actually know with any certainty to whom they had extended credit and just to ensure the waters were well and truly muddied, they left it for 12 months before chasing it.
The list of stories is depressingly long, a glass supplier losing £35k in the Connaught collapse, a make-up wholesaler loosing £6k to a slippery character reselling on eBay, a training company delivering 8 months of training, total value £15k, to a company despite never getting any invoices paid. A recruitment company owed £125k by a business that had gone into administration, still supplying labour on credit to the new co that was formed by the same directors to name a few.
With all of theses cases, the most valuable part of the invoices is the paper upon which they are printed.
So what can be done? Here are a few simple tips to help avoid the calamities above.
Before extending credit have a credit policy in place and ensure it is followed. A check list is a good idea, as a minimum ensure you:
Identify the entity with which you are trading (ONLY trade with this entity unless you follow the same process for another)
Consider building a trading relationship with a company before extending credit. A directors personal guarantee may be available, up front payments for initial orders or a payment plan rather than leaping in at the deep end may make trade possible with a lower risk.
Put in place a method of assessing credit worthiness
If you can’t do this yourself, pay someone to do it for you. There are systems and services that can help you “score” a company’s credit worthiness, one cheap and effective solution is Credit Guardian (Download it for FREE here). There are more sophisticated services that take into account management accounts rather than just the annual accounts snapshot (bear in mind that after 2 years of recession even the strongest of companies may show a performance that doesn’t reflect a fair position).
Put in place a review timetable, that is check your initial assessment at regular intervals or when you notice any change in trading behaviour.
Where you do decide to give credit, make sure your new customer understands the terms upon which the credit is given. State these terms, at least in précis on every invoice including the consequences for late payment, something like:
Our payment terms are [X] days. We reserve the right charge Interest and late payment fees on overdue payments in line with the Late Payment Act.
Make sure you understand the process your customer needs to follow to pay an invoice so that you can submit correct documentation on time to the right people.
Have an effective Credit Control process in place or consider using a Credit Control service and tell your customer what the process is.
When designing our Credit Control process, make sure it is consistent, runs in a regular, timely fashion and starts as soon as invoices are released and never gets usurped by other duties.
Make your customer aware that it is standard policy for the Credit Controller to call before payment is due to check everything is in place to facilitate payment.
And finally have a defined point at which you consider escalation to a debt recovery service. If you have given 30 day terms and someone has not paid you after 90 days then it is time to start asking if they are a customer or just a potential bad debt write off in the making.
By taking action you will not upset a customer, as to be, and to continue to be considered as a customer, they have to pay for what they have had delivered.
Don’t let invoices hang around for so long you start to fall in love with them, act quickly and decisively in line with a written down process and you will stand a much higher chance of getting some, if not all, of your money owed.
Tags: aged debt, Cash Flow, CCS, Credit Control, Credit Control Process, Credit Control Service, Credit Hound, Debt Recovery, Draycir, dso
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Some advice from a Millionaire Mentor….
Be mindful about money
* Highlight your payment terms on the invoice
* Appoint the right person to do your credit control (you, the business owner are not the best person to do this)
* Keep a tight eye on your finances .. don’t bury your head under the bills
* Avoid paying out cash too quickly yet stick to payment terms your suppliers offer you
* Consider offering a discount incentive for large invoices you raise
* Re-negotiate terms on a regular basis with suppliers
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