Despite the Late Payment legislation UK businesses are taking the longest time on record to pay their bills.
Businesses are currently taking over two months to settle their debts according to the credit checking company Experian. This is an increase of two days in the last year.
As usual the larger companies are taking longest with an average of 82 days and smaller companies now averaging over 61 days. However it is usually the smaller companies who are most likely have cashflow problems.
The industries who have increase their payment days most are:
Electricity,
Property,
Pharmaceuticals,
Beers, Wine and Spirits,
Oil and Gas have all increased by over five days.
The longer a company takes to pay the their invoices could be an early warning indicator to cashflow problems. If you are running a business then you need to monitor the speed at which your customers pay their bills, because while the invoice is unpaid the money is at risk.
Remember a sale is not a sale until the invoice is PAID.
If the invoice is not paid then the money is at risk and could be lost.
Therefore businesses should press harder to be paid on time with in the terms of the agreement. Companies are all under pressure to hold onto cash for as long as possible.
This can lead to a battle of wills between the credit controller of the supplier and the purchaser ledger manager of the customer.
The figures indicate that the late payment culture is getting worse.
This can lead to a battle of wills between the credit controller of the supplier and the purchaser ledger manager of the customer.
Businesses should not be acting as an unpaid bank for their customers.
www.ukba.co.uk
Showing posts with label payments. Show all posts
Showing posts with label payments. Show all posts
Saturday, 21 March 2009
Friday, 20 March 2009
10 ways to speed up payment
Cash is king. The majority of businesses that fail do so because of cashflow issues.
Question:
What are the 3 most important things in business?
Answer:
Cashflow, cashflow, cashflow!
Cash flow is the life blood of any business and more businesses go bankrupt because they fail to keep the cash flowing than fail for any other reason.
The Inland Revenue and HM Customs are now much more aggressive in chasing monies they think are owed to them now that they have lost their privileged creditor status.
Insolvency
A company or business is insolvent if they cannot pay their creditors as the invoices fall due.
In order to avoid this happening you need to ensure that you get paid on time by your customers so that you in turn can pay your suppliers when their invoices fall due.
So what are the 10 steps you can take: click here.
www.ukba.co.uk
Question:
What are the 3 most important things in business?
Answer:
Cashflow, cashflow, cashflow!
Cash flow is the life blood of any business and more businesses go bankrupt because they fail to keep the cash flowing than fail for any other reason.
The Inland Revenue and HM Customs are now much more aggressive in chasing monies they think are owed to them now that they have lost their privileged creditor status.
Insolvency
A company or business is insolvent if they cannot pay their creditors as the invoices fall due.
In order to avoid this happening you need to ensure that you get paid on time by your customers so that you in turn can pay your suppliers when their invoices fall due.
So what are the 10 steps you can take: click here.
www.ukba.co.uk
Thursday, 19 March 2009
SME debtors increase by 40%
Overdue payments to small and medium-sized businesses in the UK increased by over 40% last year, taking the total that small companies are owed to over £25bn, according to research by Bacs Payment Schemes Limited.
The number of SMEs owed money across the UK increased from 51% in 2007 to 57% in 2008, and the national average of outstanding payments owed to small firms increased to £38,000 - up £8,000 from 2007.
Small businesses in the Midlands have been hit the hardest in the UK, with the average company in this region claiming overdue invoices amounting to just under £70,000.
"Late payment and bad debt are the scourge of business owners. Often, they are major factors behind businesses being forced to close," said Phil McCabe, spokesman for the Forum of Private Business.
"The amount of money owed to small firms has soared over the past year as big businesses seek to create credit lines for themselves by squeezing their suppliers. In addition, despite the Government's pledge to pay its suppliers within 10 days, public organisations continue to be among the worst culprits."
www.ukba.co.uk
The number of SMEs owed money across the UK increased from 51% in 2007 to 57% in 2008, and the national average of outstanding payments owed to small firms increased to £38,000 - up £8,000 from 2007.
Small businesses in the Midlands have been hit the hardest in the UK, with the average company in this region claiming overdue invoices amounting to just under £70,000.
"Late payment and bad debt are the scourge of business owners. Often, they are major factors behind businesses being forced to close," said Phil McCabe, spokesman for the Forum of Private Business.
"The amount of money owed to small firms has soared over the past year as big businesses seek to create credit lines for themselves by squeezing their suppliers. In addition, despite the Government's pledge to pay its suppliers within 10 days, public organisations continue to be among the worst culprits."
www.ukba.co.uk
Sunday, 1 February 2009
Profit is sanity
‘Turnover is vanity, profit is sanity’ – so the business saying goes. But what does that mean in practice? In an economic downturn, sales often start to fall and so businesses scramble to replace this lost turnover.
Competition intensifies and prices are cut to win business. But instead of replacing lost turnover to help cover your costs, you have unwittingly taken on unprofitable business that will leave you with a loss.
Is that new business worth it?
• Cost each product or service: do not take on business if it does not make a profit
• Look at ways to reduce costs: this will allow you more scope to reduce prices
• Be wary of big orders: this can lead to overtrading when the business takes on more work than it can handle and runs out of money to finance it
Maintain Profit Margins
The flip side of price is cost – you can maintain profit margins even if you are reducing prices, provided you also reduce the cost of what you are making or providing.
It is vital to keep overheads down but avoid cutting:
• Stock levels to such a low point that you cannot fulfil new orders
• Staff you need to run your business
• Sales and marketing expenditure which you need to attract new business
• Investment in equipment or product development that enables you to remain competitive
• Insurance as you could leave your business inadequately covered
On cutting costs...
• Don’t get emotionally involved. Make hard-headed business decisions. You may want to keep a particular office open because it was where you started or a certain product line because you created it. If it is losing you money, you have to lose it – or risk losing your business.
• Make decisions based on the facts. A “gut feel” is not good enough. It is only when you see what is profitable and what is not that you can make a decision.
• Start with non-essential expenditure – then tackle fixed costs such as utilities, stationery and other outgoings.
• Pass on price cuts. If you are under pressure to cut your prices ask your suppliers to do the same – if you can. If they won’t negotiate on price ask for longer payment periods or shop around.
Are you making the most of management information?
Knowing which products are going to sell best and bring in the most profits and which costs are rising and could hit your margins, is vital. For that, you need to have the right management information.
The key difference between this economic downturn and the recession of the early 1990s is information technology.
The Key Barometers
There are usually four or five barometers that indicate the health of any business. You need these to be annual rolling totals either on a monthly or even a weekly basis. Check the actual figures against those forecasted and against the previous year’s. These key indicators will vary from business to business but could include:
• Turnover – not just the total but some key figures.
• Enquiries – or foot traffic, number of visits to your website or another key indicator of interest in your product or service.
• Stock – if too much of one item is piling up it is a reflection that sales of that particular product are falling. The danger is that too much cashflow will be tied up when you need it for day-to-day needs.
• Costs – keep track of how these are rising. As has been seen in recent months, some costs – such as fuel – can rise rapidly.
• Late payments – you need to keep a daily eye on how quickly money is coming in so you can spot potential problems early on.
Then you need to act on the information. For example, by selling off surplus stock or putting up prices to reflect rising costs.
[Extract from Trading Through The Economic Downturn - published by NatWest - full Guide available by clicking here]
http://www.ukba.co.uk
Competition intensifies and prices are cut to win business. But instead of replacing lost turnover to help cover your costs, you have unwittingly taken on unprofitable business that will leave you with a loss.
Is that new business worth it?
• Cost each product or service: do not take on business if it does not make a profit
• Look at ways to reduce costs: this will allow you more scope to reduce prices
• Be wary of big orders: this can lead to overtrading when the business takes on more work than it can handle and runs out of money to finance it
Maintain Profit Margins
The flip side of price is cost – you can maintain profit margins even if you are reducing prices, provided you also reduce the cost of what you are making or providing.
It is vital to keep overheads down but avoid cutting:
• Stock levels to such a low point that you cannot fulfil new orders
• Staff you need to run your business
• Sales and marketing expenditure which you need to attract new business
• Investment in equipment or product development that enables you to remain competitive
• Insurance as you could leave your business inadequately covered
On cutting costs...
• Don’t get emotionally involved. Make hard-headed business decisions. You may want to keep a particular office open because it was where you started or a certain product line because you created it. If it is losing you money, you have to lose it – or risk losing your business.
• Make decisions based on the facts. A “gut feel” is not good enough. It is only when you see what is profitable and what is not that you can make a decision.
• Start with non-essential expenditure – then tackle fixed costs such as utilities, stationery and other outgoings.
• Pass on price cuts. If you are under pressure to cut your prices ask your suppliers to do the same – if you can. If they won’t negotiate on price ask for longer payment periods or shop around.
Are you making the most of management information?
Knowing which products are going to sell best and bring in the most profits and which costs are rising and could hit your margins, is vital. For that, you need to have the right management information.
The key difference between this economic downturn and the recession of the early 1990s is information technology.
The Key Barometers
There are usually four or five barometers that indicate the health of any business. You need these to be annual rolling totals either on a monthly or even a weekly basis. Check the actual figures against those forecasted and against the previous year’s. These key indicators will vary from business to business but could include:
• Turnover – not just the total but some key figures.
• Enquiries – or foot traffic, number of visits to your website or another key indicator of interest in your product or service.
• Stock – if too much of one item is piling up it is a reflection that sales of that particular product are falling. The danger is that too much cashflow will be tied up when you need it for day-to-day needs.
• Costs – keep track of how these are rising. As has been seen in recent months, some costs – such as fuel – can rise rapidly.
• Late payments – you need to keep a daily eye on how quickly money is coming in so you can spot potential problems early on.
Then you need to act on the information. For example, by selling off surplus stock or putting up prices to reflect rising costs.
[Extract from Trading Through The Economic Downturn - published by NatWest - full Guide available by clicking here]
http://www.ukba.co.uk
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