Late payments not improving – business news 7 July 2020.
7 July 2020.
James Salmon, Operations Director.
New research shows late payments are not improving, Government to fund green projects, 40% plan redundancies, loan defaults to be reviewed, stamp duty holiday, wealth tax, audits, and other Covid-19 and market news.
Here are CPA we want to share the business news stories we have seen that we think will affect our members and readers. Many of us are busy fighting to protect our businesses and therefore might have missed some of the news that could impact small businesses, their owners and those that sell on credit.
Late payments have just not improved!
Large companies have made no progress in improving the prompt payment of their suppliers over the last five years, according to accountants Moore.
Suppliers are currently waiting an average of 41 days to be paid, the same length of time as in 2015.
It would seem that initiatives to tackle this issue, such as the UK’s Prompt Payment Code supported by the small business commissioner; and the EU Late Payment Directive, are simply not working. Or in other words, any benefit that comes from these initiatives is being wiped-out by late-payers’ behaviour getting worse.
The research by Moore also shows that over 15% of the 113,000 UK businesses covered by the study are having to wait 90 days or longer to be paid.
Every year thousands of businesses become insolvent because of late payments by their customers.
And the late payment of suppliers is only to get worse over the next few months. Many big businesses are already using talk of economic slowdown as an excuse to delay payments even longer and force tougher trading terms on their small suppliers, despite receiving mountains of cash in support from the Government and other sources.
The Prompt Payment Code was established to improve SMEs’ financial stability by helping them to recover late payments owed to them more quickly. The Code requires signatories to pay 95% of suppliers within 60 days; to aim towards 30 days, and to encourage good payment practices across supply chains.
Duncan Swift, partner at Moore, said “The data suggests the Prompt Payment Code is not being kept to and stricter enforcement measures are needed to ensure businesses pay all of their suppliers on time. The current ‘name and shame’ tactic is not enough of a stick.”
Businesses in the food supply chain, for example, have been suffering from late payments by large supermarkets for decades.
Since 2013 the Groceries Code Adjudicator has repeatedly called on the UK’s leading supermarkets, that account for over 80% of the market, to change this. However, only 5 of 13 supermarkets are Prompt Payment Code signatories and much of their SME late payment behaviour is masked by their fuel supplies, with oil companies typically being paid within 5 days of delivery. At any given time, the Top 4 supermarkets alone currently have debts due to suppliers over 30 days old of around £4bn.
Other sectors that have often struggled with late payments include the construction sector, a problem that has contributed to the sector’s remarkably high insolvency rate.
When small businesses don’t receive payments on time, the money has to come from somewhere. They might be forced eventually to write off those invoices as bad debt which many cannot afford to do. Slow payment also restricts cash-flow and means businesses may not be able to pay their own bills or staff.
SMEs are under extreme financial pressure, with many concerned that they simply do not have enough cash to meet upcoming costs, such as rent and payroll. This pressure is particularly acute right now in sectors where lock-down restrictions have dramatically impacted their trade , such as construction and manufacturing.”
Ensuring the timely payment of invoices is critical for small suppliers looking to survive the current crisis and making sure they have the cash they need to get through the lock-down and be ready for the new normal.
CPA can help you survive Covid and get paid by your late paying customers. And if you have been late paid in the past, we can help you unlock a windfall you are due for previous late payments, from business customers who you perhaps no longer trade with.
Covid-19 general news
Cases top 11.5 million; deaths exceed 537,000
Top American infectious disease expert Anthony Fauci warned that any new vaccine against covid would only protect people for a finite amount of time. “We’re still knee-deep in the first wave” of the pandemic, he said. But it is clear that any vaccine will not be like the one off measles vaccine and while we don’t know how long the vaccine may last, we may need to receive annual shots or even more frequently.
In the meantime, Fauci said public health measures such as wearing a mask, social distancing, and frequent hand-washing should be used as a vehicle to a safe re-opening. “It’s not an obstacle, it’s a pathway to do that. We can’t create this binary thing where it’s ‘us against them,’” he said.
More than 239 scientists from 32 countries are warning that airborne transmission of the virus indoors should be taken more seriously and are calling on the World Health Organization to revise its recommendations, which they say underestimate the dangers of transmission by tiny, viral particles that linger in the air indoors. When people talk or laugh, they create an invisible mist or a droplet cloud of tiny particles that floats in the air around their heads. That fog can hold enough virus to transmit the disease and walking into it is like being hit by their saliva. Indoors, without a breeze, that cloud can drift across a room at more or less head level. Keeping indoor areas ventilated is vital.
Evidence is mounting, that Covid-19 is more of a blood vessel disease than a respiratory disease. While the virus may enter the body through the lungs, it seems to do a lot of its damage by attaching to the insides of blood vessels, infecting organs, like the kidneys and the brain, with lots of fine blood vessels. Duringautopsies, they find thousands of tiny little blood clots all over the body which explains why some patients may experience strokes, dementia and disorientation.
The European Commission forecasts a contraction of 8.7% in the euro area this year, a full percentage point deeper than previously predicted. Risks remain “exceptionally high and mainly to the downside,” the commission said.
Germany’s government will keep in place its requirement to wear masks in shops, even as new infections slow to a trickle across the country.
Brazil’s Jair Bolsonaro is undergoing a Covid-19 test for a second time after showing symptoms.
The state of Victoria announced a six-week lock-down across metropolitan Melbourne, affecting 5 million residents in a bid to quell the risk of a second wave of infections in Australia.
India reported a record daily case count on Sunday with 24,850, bringing the country’s total infections to more than 673,000.
A large-scale study published in The Lancet found that only 5 percent of the population in Spain had developed antibodies to the coronavirus, indicating that herd immunity is still far-off.
Halfords reported a jump in cycling sales during the UK coronavirus lockdown as Brits bought bikes and avoided public transport, however the boost was offset by a sharp drop in motoring sales, the retailer said this morning.
Markets.
The FTSE 100 climbed 2% yesterday followed swiftly by the 250 at 1.5% with European markets climbing similarly with housebuilders leading the UK rally as construction PMIs rose to 55.3 in June from May’s anemic 28.9, well above the consensus expectation of 47.
In the US the S&P50 climbed 1.59% and the NASDAQ 2.21% as Tesla shares shot up over 13% to stratospheric levels.
All this as Europe threatened to escalate the trade war with the US over aircraft subsidies unless the US returns to the negotiating table.
Footfall
Footfall in England jumped almost 36% on Saturday evening, according to new research, as drinkers flocked to high streets around the country to enjoy their first pints out after more than three months of lockdown.
Sunak to spend £3bn on green projects
Rishi Sunak will set aside £3bn to create green jobs and improve the energy efficiency of public buildings when he announces plans to kickstart the economy on Wednesday.
As much as £2bn will be set aside for a green homes grant which will give households vouchers to spend on energy efficiency schemes such as loft lagging and floor insulation. The Chancellor’s package would include a new £40m fund dedicated to cleaning up nature and planting trees which would back up to 5,000 new jobs, the Treasury said.
Over two-fifths of employers plan redundancies
A survey by the think tank Bright Blue has found that 44% of businesses using the Government’s job retention intend to make redundancies when the support is withdrawn in October.
Economists fear that redundancies will start rising from next month, when companies have to start paying national insurance and pension contributions, representing 5% of employment costs.
Medium-sized businesses were most concerned about meeting these obligations from August, with 65% saying they would cut jobs when the scheme ends in October. Former Chancellor Norman Lamont says in the Telegraph that the Government should temporarily suspend or reduce Employers’ National Insurance Contributions to prevent a “tsunami of unemployment.”
Companies pause frantic fundraising to assess pandemic damage
Companies are pausing for breath after racing to secure cash, the FT reports, drawing down bank credit lines, agreeing government rescue financings and issuing new debt and equity to outlast the coronavirus crisis.
UK banks ‘draw up code of conduct’ for coronavirus business loan defaults
UK Finance and the state-owned British Business Bank (BBB) have begun talks with commercial lenders in the hope of setting up industry-wide debt collection standards for government-backed coronavirus interruption loans, amid fears a high proportion of the loans will never be repaid.
Loans granted under the flagship coronavirus business interruption loans scheme (CBILS) and bounce back loan scheme for SMEs (BBLS) have a one-year repayment free period, with the first repayments due in spring 2021.
However, Bank of England governor Andrew Bailey was warned by an industry group last month that up to £36bn of emergency loans to SMEs risk turning toxic, with banks warning that up to 50% of BBLS were unlikely to be repaid. British banks are keen to avoid being perceived as pursuing SMEs for loan repayments too aggressively after a series of scandals surrounding lenders’ treatment of small firms following the global financial crisis.
Stamp duty holiday could save average English buyer £7,000
Chancellor Rishi Sunak is expected to announce plans in his Summer Statement for a temporary stamp duty holiday that could save the average English buyer £6,915 – and make 88% of English property transactions exempt from the tax, according to Savills. Mr Sunak is predicted to raise the threshold at which buyers start paying tax on their purchases from £125,000 to as much as £500,000. The holiday would come into effect at the moment analysts are expecting the economic impact of coronavirus to hit the property market hard. Both mortgage holidays and the furlough scheme are due to end in the autumn, meaning there could be a spike in forced sellers, and a fall in the number of people able to purchase.
“Covid refugees” drive up price of prime country homes
Londoners fleeing the capital in search of rural homes more conducive to comfortable lockdowns and home working are driving up prices, particularly in the prime bracket, with some buyers paying as much as 17% over asking price. The flood of interest has led agents to warn of a bubble developing. Fiona Pengelly of Strutt & Parker in Salisbury described most of her buyers as “Covid refugees”. She said: “Since the market reopened, I have sold a third of our stock off market in excess of guide price.”
Financial services saw volumes slump at fastest pace on record
A survey of the financial services sector by the CBI and PwC reveals that volumes fell at their fastest pace on record during the lockdown while jobs were cut at the fastest pace in a decade. Business volumes fell by 12% on average and profitability slumped at the fastest rate since the financial crash. General insurance companies were the only sub-sector to defy the downturn.
A wealth tax is now the only answer to save the country
The Guardian’s Polly Toynbee says a wealth tax is now the only solution to save the arts and all the other things “we regard as essential for civilisation.”
Ms Toynbee cites a claim by Professor Arun Advani, one of a team of people working on an Institute for Fiscal Studies, who says a one-off windfall tax of 10% on all wealth would yield £1trn – enough to save every sector stricken by the coronavirus.
She also points to Gus O’Donnell, the former head of the civil service and a long-time Treasury official, who said recently that the Conservatives have been presented with an opportunity to prove their promise for one nation Conservatism – only the Tories with a huge majority can push through reforms that would see earnings from wealth and work more evenly taxed.
Big Four told to outline plans for audit split by October
The UK’s Big Four accounting firms have until 2024 to separate their audit practices, following an edict from the accounting regulator that marks the largest shake-up of the industry in decades. The Financial Reporting Council is asking PwC, Deloitte, KPMG, and EY to agree to operational separation to ensure audit practices don’t rely on “persistent cross-subsidy from the rest of the firm”, a move that comes in response to a number of reviews prompted by the failure of Carillion in 2018. Companies will be required to have separate profit and loss accounts for their audit divisions, have a separate audit board and pay auditors in line with the profits of just their division. Nevertheless, the regulator stopped short of requiring auditors to be paid from a separate pool of profits generated only from audit fees, a move that would prevent a real or perceived conf lict of interest due to auditors being paid from the same profits as a firm’s consultants. Hywel Ball, UK chairman of EY, said that the proposed reforms could “restore trust and reinforce the UK’s status as one of the most attractive markets worldwide for companies, investors, employees, and others”. Stephen Griggs, deputy chief executive and managing partner of the audit and assurance division at Deloitte UK, welcomed the proposals. “We remain committed to playing our role in delivering change that embraces audit quality, improves choice and restores trust,” he added. The accounting firms said they were working with the FRC to develop ways for the separation, and are expected to submit plans by October 23rd.
Experts unimpressed with watchdog’s plans for Big Four audit split
Responding to the Financial Reporting Council’s announcement that the Big Four must separate their audit and non-audit businesses by 2024, accounting professor Prem Sikka said the plans were “utterly inadequate” and that a “complete structural” split was needed. “It’s not the case that you can have both under one roof but separated by some imaginary Chinese walls,” Sikka continued.
“There is absolutely nothing in this statement which would improve the accountability of auditing firms.” The regulator was undertaking a “cosmetic exercise,” Sikka claimed. Meanwhile Darren Jones MP welcomed the move but questioned why the Big Four firms were allowed four years to make the changes. More criticism came from Atul Shah, an audit specialist and visiting lecturer at City University, who added that not only should the Big Four be broken up, but they should be downsized too in order to reduce their power.
The Times cites Michael Izza, chief executive of the ICAEW, who called the proposed reforms “pragmatic”, but said that they were unlikely to “improve quality or choice in the market”. Elsewhere, the FT’s Lombard says the FRC’s newly published principles are “fairly sensible” but are “tweaks” compared with what is needed to bring about the change in mindset Donald Brydon advocated in his review of audit. The Telegraph’s Ben Marlow also suggests the FRC go further to implement the proposals put forward by Brydon.
Wirecard executive arrested in Munich on suspicion of fraud
Wirecard executive Oliver Bellenhaus, who ran the company’s CardSystems unit in the Middle East, has been arrested by prosecutors in Munich. Meanwhile, the Times reports that Mastercard was warned about Wirecard’s links to an alleged laundering network in 2016. Evidence was passed to Paul Paolucci, a vice-president at Mastercard, and Howard Fields, head of anti-money laundering, alleging that fake ecommerce sites with a series of supposed connections to Wirecard were being used as a front for channelling online gambling proceeds through Mastercard’s system.
Eddie Stobart reports jump in losses, due to accounting error
Annual losses at logistics group Eddie Stobart have jumped significantly, following a £169m charge in December as a result of an accounting blunder. The company sacked its chief executive and suspended trading in its shares in August last year, after an accounting investigation found its 2018 profit had been overstated by £2m. Losses before tax rose to £238.9m for the 12 months to the end of November 2019, up from £22.3m a year earlier. Exceptional costs were reported of £200.2m, up from £5.1m, to factor in the £169.2m impairment charge.
Don’t let Covid-19 bust your business!
It will if your cash flow dries up, either sooner or later.
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid since 1914. We have seen many financial crises, this one will be particularly deadly for suppliers for sometime to come.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. Above all tactfully, because maintenance of goodwill is paramount.
To meet the needs of creditors in the current crisis, we have designed a “critical care” package especially tailored for the situation.
- The annual package costs start at very low rates
- A minimum performance warranty is provided
- Several complimentary services included
Clients instruct CPA on-line via their PC or phone, completely user-friendly. Your late paying customers are told to pay you direct (not to us).
A very recent report shows a 23% increase in the number of unpaid invoices since March 11th THIS YEAR – are you getting a build-up of late payers?
Right now, overdue accounts must be a concern and CPA has a great track record of encouraging slow-payers to pay their suppliers quickly.
It takes less than 17 minutes to see how you would benefit, do you have the time now?
No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
Do you sell on credit?
With pressures on the cash flow it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.
Those customers will look for the easiest option to boost their cash-flow. Don’t let it be you.
You can’t just assume your customers can and will pay you eventually, no matter how big their name is.
It is essential to have credit management systems in place to monitor and check your customers credit worthiness.
It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.
About CPA
The Credit Protection Association can help!
Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply on credit, help us help you identify the risks.
Why use a third party collector?
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When your customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Over the years we have collected billions in overdue invoices for our customers.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
You might be hesitant about contacting a debt collection agency. What are they going to be like?
Can they help your particular type of business?
There is no need for concern. CPA are courteous, helpful and very probably have had direct experience of working with your type of business.
Debt collection agencies are not all alike.
Success lies in both recovering money and keeping customers happy. The Credit Protection Association was founded in 1914 and has helped tens of thousands of UK businesses to collect outstanding payments and reduce the risk of incurring bad debt. We believe that creditors deserve to be paid for the work or goods they have supplied but we fully understand the need to maintain
the best possible relationship with customers!
At The Credit Protection Association, we provide solutions, advice and back-up in all areas relating to the supply of services or goods on account. Client-members receive everything they need from a single source to reduce debtor days and write-offs.
The Credit Protection Association has helped has assisted tens of thousands of UK businesses with their credit control requirements, since the First World War.
We are polite, firm and efficient when it comes to recovering outstanding debt.
“We have used CPA for a number of years now. The website is easy to navigate around with lots of helpful reports. The staff are always at hand and very friendly. CPA has helped us reduce our debt over the years and keep track of potential issues with our customers.”
~ CPA client in Buckinghamshire
“The service from CPA has proved to be everything that you said it would be. We have already seen a huge benefit. We have had a number of overdue accounts paid promptly and directly to us. It is also a huge weight off our mind to know that once we have passed an overdue payment over to you, you take care of everything whilst keeping us informed.
~ Credit Controller client in Warrington
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
CPA is passionate about late payment
The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.
We are extremely passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.
If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.
As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.
Under little used legislation, you are entitled to compensation for those late payments.
Now you can boost your own cash-flow.
CPA can help unearth the those hidden treasures.
We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.
Yes, CPA can help you boost your business cash-flow.
Don’t let your bankers control you, contact CPA today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you realise you could be sitting on a fortune?
Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.
If you sold B2B on credit then there may be a hidden source of capital you can call on.
If you fancy an bit of extra cash in your business, rather than jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.
Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.
We can help you uncover the pile of gold, you didn’t even know you were sitting on.
If you trade with other businesses and were often paid late then you could be entitled to significant compensation.
Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.
Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.
You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.
That compensation could provide the cash boost your business needed.
But don’t delay, that compensation evaporates if not claimed within six years of the late payment.
How can CPA help?
CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.
We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.
Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.
CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.
The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit. You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.
We do the work, you receive the cash.
If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.
We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.
We are helping business owners who are looking to boost the returns from their business before they retire. We are helping businesses who have lost major clients after years of loyal service to get properly compensated for systematic late payment. We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.
Those former clients who regularly paid you late can finally be made to pay.
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections