Despite often clearly spelling out their payment terms SMEs are having to wait an average of 41 days over the agreed payment terms from many of their customers.

Recent research shows that in 37% of cases customers are stretching payment terms by up to three months and at any one time £24billion is owed to SMEs.

The increase in VAT will only worsen the situation warns the Law Society and urges small business owners to guard against the problem of late payment.

The Society says that not enough businesses are aware of the protections available to them which safeguard against cash flow blockages. Solicitors will be able to help SMEs take advantage of these.

Law Society President Robert Heslett says:
“Average commercial debts caused by late payments are high in the UK, and for SMEs a lack of cash flow can be crippling. With credit less available to those businesses from banks, late payments have a far more serious consequence for SMEs.

Considering the amount of red tape SMEs and start-ups are faced with, it is no surprise that seeking protection against late payment from customers does not come top of the to-do list. However, it could be the difference between the business surviving or not, especially in the uncertain economic climate.

A carefully worded contract drawn up by a solicitor between a business and their commercial customers can include clear terms on late payments, including penalty clauses and strict time frames for payment. Such terms can act as an effective deterrent for late payment and encourage timely payment for services, thus avoiding these terms coming into play.”

The Law Society says that contracts between businesses which include late payment clauses need to become a common feature of the SME market. The European Union is currently looking at updating a directive aimed at tackling late payments such is the impact on the SME sector across Europe as a whole.

Robert Heslett adds: “Many smaller businesses perhaps felt the recent budget did not do enough to tackle cash flow problems head on, and although the EU is looking at it, the safest bet is to protect against cash flow blockage between the customer and the business with a solid, solicitor-drafted contract.”

Avoiding court
The Law Society says that should SMEs and start-ups hit problems with customers failing to meet payment deadlines, court is not the only next-step option. Alternative Dispute Resolution and mediation are alternatives for SMEs.

Law Society President Robert Heslett says: “There is a presumption that going to court is the only course of action when late payments cannot be resolved. However, many solicitors specialise in ADR and mediation, which can prove an effective way of solving the problems for SMEs and other businesses. ADR and well-drafted contracts can be effective in avoiding the last option, going court.”

If your company is already up and running or is in its earliest stages, the bank has a selection of business accounts that could be ideal for your needs. If you fall into the former category but are unhappy with the service you are currently getting, you may find switching banks is the right way to go. In these cases Lloyds TSB’s business banking department will do all it can to make the transition as easy as possible. Those in the latter stage however may be looking for all the help they can get and it is here they may also find they’re well catered for.

In order to help manage cashflow and resources in an effective way, Lloyds TSB has produced a selection of guides for both the experienced and novice entrepreneur. The bank has also produced a charter for small businesses which is designed to underline exactly what type of support can be offered across pledges that could provide help in the toughest of economic times.

The selection of guides also includes details on how to plan for these conditions and how changes in the market can impact your venture. Information on how to encourage customers to pay up on time is also featured, as is advice on how to monitor money flows between you, your customers, suppliers and employees. A selection of downloads, podcasts and webinars that support some of these issues are also available via the Lloyds TSB business banking website, meaning you have direct access to tips from a selection of experts once you are onboard.

The bank also has a partnership with Sage, one of the biggest suppliers of business management software in the UK, which provides users various free tools. In addition to this there is a 90-day trial version of Sage Start-up that will show you how to get to grips with some of the key issues that affect new businesses. Information available from the Institute of Credit Management is also available that covers subjects like knowing your customer, invoicing, credit insurance and treating suppliers fairly.

All of the above, in conjunction with access to a dedicated relationship manager that will help you make the most of your new business account, could mean that Lloyds TSB could be a great partner to have in getting your project where you want it to be.

Restrictions put in place by the financial institutions to make the business of borrowing money may have been eased slightly, but too late in many cases to help the many businesses that demanded help a year or more ago.

The government’s may have saved the high street banks, but in doing so left many business of all sizes having to fend for themselves. The results of this are still clear to see with news of job losses around the whole of Europe almost on a daily basis.

The fact is that none of us are safe from the constant talk of job losses and redundancies and many have already adjusted to living on a more frugal budget as they do not know if they will be next.

There are many amongst us who use our credit cards on a daily basis and have built up a balance that is becoming a struggle to deal with. In the past it was easy to transfer outstanding balances to another card offering zero interest for a given period, giving some reprieve to the borrower who could make plans to clear the debt without incurring further charges.

These zero percent offerings are almost a thing of the past in today’s climate, but there are still some low APR credit card offers around. The Republic of Ireland’s third largest credit card provider MBNA  for instance are currently offering zero per cent on transfers to their Platinum Card for a period of the first ten months.

The Platinum card is one of a range of credit cards that are acceptable in over 29 million retail outlets and 1.2 million ATMs around the world, making it one of the best credit card deals in Ireland right now.

This is of course all perfectly legal in the UK and is not only a huge benefit to the company directors of such underhand businesses, but is also incredibly lucrative to liquidation and administration advisers, who will leave little for creditors to pick over.

The FPB give their description of ‘phoenix companies’ as;

“A phoenix company exists where the assets of one limited company facing liquidation are moved to another business. Often, some or all of the directors remain and the new business frequently operates in the same area as its predecessor.”

Most business owners will have experience of ’serial’ phoenix company operators in their own locality and will be very wary of dealing with them, particularly on credit terms.

The problem is that when these companies go bust they normally owe a substantial amount of money which creditors have absolutely no chance of getting. This has a knock on effect down the chain of supply, with everyone suffering except the crooked directors.

MP for Portsmouth South, Mike Hancock said:

“The Better Payment Practice Campaign found that a quarter of companies have fallen foul of ‘phoenix companies.’  Obviously, smaller businesses in particular need to get all the money that is owed to them and even one default can make the difference between an otherwise well-run company going bust or continuing in business.”

The actual figure from the Insolvency Service recorded 35,242 people in England and Wales were declared insolvent, a 28% increase on the same period last year.

It represents the highest figure since records began in 1960 and there appears to be no let up as figures will only rise as unemployment continues to increase.

Anthony Cork, director at accountants Wilkins Kennedy, said;

“Those who have already suffered job losses are just beginning to be represented in these figures but there are many more behind them who are still battling to weather the storm.  Historically unemployment has continued to rise even as the economy begins to recover, and this means that personal insolvencies can only soar even further. Things are likely to become very bloody indeed.”

Some good news is that company insolvencies fell by almost 10% in the period, with 1,300 businesses suffering compulsory liquidation, with a further 1,578 in the first stages of the winding up process.

With the current state of the economy it would not be a surprise to see the figures reach even higher levels in the new year as many businesses and individuals over stretch themselves in the Christmas period.

traditional pawnbroker sign

The UK’s biggest pawnbroker, H&T which has over 120 branches across the country has said the business is trading well ahead of expectations as cash strapped Britons continue to trade in their valuables for cash.

H&T have opened 56 new outlets in shopping centres across the UK over the last year, recognising the growing recession fuelled surge in demand for their services. The company are planning a further twelve shops in the coming months.

The pawnbroker chain deals almost exclusively in gold and diamond set jewellery and say they have ‘benefited considerably’ since June 2009 with higher Gold purchasing volumes.

H&T which started out in 1897 as Harvey & Thompson with a shop in London’s Vauxhall Bridge Road, says that the current trend may not be sustainable and has therefore taken premises on short term leasing.

The number of pawn broker outlets in the UK has risen by 25% to over a 1,000 in the last five years.

The deal will see Tesco selling fifteen of its stores and two of its distribution centres to a 50-50 joint venture company owned by Tesco and the unnamed pension fund.

All properties will be leased back to the joint venture on 30-year RPI-linked leases, with an average initial yield of 5.2% for the stores and 6.3% for the distribution centres.

The deal is  the latest phase in the firms ongoing programme to release value from its property portfolio – a programme that was started in 2006 and now with a transaction value of £3 billion. It aims to keep 70% of its properties on a freehold basis, a level that is maintained through new store openings.

The number of companies going into liquidation has grown by a massive 39.1% over  the same period in 2008, while the number of unemployed rose by 281,000 in the second quarter, the biggest quarterly increase since 1971 when records began.

The jobless rate stands at 7.6% – it’s highest in over a decade, with labour market ‘experts’ predicting a return to the Thatcher days of one in ten out of work by the end of the year.

Despite the many, so called experts, predicting the end of the financial crisis, we continue to see the number of  casualties increasing on a daily basis. Making credit more freely available may serve a purpose but for many businesses finance is just one of many problems.

Many companies have survived the horrors of the last twelve months by making cutbacks and shoring up finances, but now lack the resources to continue. We are far from out of the woods, as the market contracts further business becomes more scarce and competition fiercer.

These are still desperate times for the economy and many more businesses will bite the dust before we see any glimmer of recovery.

By loading account details into the software, with the press of a button, Kashflow can pay staff whilst producing accounts which are HMRC recognised.

The fully integrated option on Kashflow is called PayEscape, whereby you simply enter into the website the number of hours your staff have worked and they take care of the rest from producing payslips to sending the accounting data to KashFlow.

Another key benefit is that it automates the accounting of all sales and purchases that a small business makes via Paypal. Totally eliminating hours of data entry. The Kashflow / Paypal package is the first of its kind and means small business owners who run online retail sites or eBay shops will now have an automated and seamless online process for logging sales on their accounting software.

Chairman of KashFlow and former Secretary of State for Trade and Industry Lord Young of Graffham said,

“This is an exciting announcement and there is a great deal of synergy between the two brands, the demonstrated ability to be able to predict and be prepared for future market trends along with the fact that we have both won awards that have been chosen by our users rather than a judging panel. To get the chance to partner with such a globally renowned brand such as PayPal not only demonstrates how far KashFlow has come as a business, but also speaks volumes about the team behind the company and of whom I am immensely proud”.
Cameron McLean, General Manager of Merchant Services, at Paypal comments,

“We are delighted to have partnered with KashFlow who like PayPal, have a strong foothold in the SME market and offer PayPal a great way to reach a significant audience. Enabling small businesses to link directly to PayPal accounts at the click of a button not only offers convenience but helps safeguard against sales data being lost or entered incorrectly due to human error. In addition a number of SMEs that use KashFlow are also PayPal customers saving business a huge amount of time.”

Ryanair had written down the fall in the value of it’s stake  in state owned carrier Aer Lingus by €225million, along with accelerated depreciation on aircraft disposals of €51.6million, revealing a net loss for the year 2008/2009 of €169million.

Without the write downs Ryanair had shown a full year net profit of €105million.

Ryanair has managed to increase passenger numbers by 15% during the last year while rival carriers have struggled, British Airways for instance now insisting that they face a ‘fight for survival’, as O’Leary predicts further growth for this year by cutting fare prices.

As cash rich Ryanair sees it’s €2.3billion cash pile growing, O’Leary remains bullish over the prospects of his business over the competition in the coming year. He says:

“All of our major competitors have reported material reductions in short-haul capacity and traffic, Ryanair will continue to lower fares to stimulate traffic growth, maintain high load factors and win more short-haul traffic from our high fare competitors.”