Late payments stifling economic recovery as UK SMEs turn down work to manage cashflow

The majority (55%) of UK SMEs are being paid later as a result of the pandemic in a trend which is threatening the economic recovery, according to Bibby Financial Services (BFS).

More than a third (36%) of SMEs have seen payment times increase by more than three weeks, while 28 per cent have seen an increase in bad debt. More than one in 10 (12%) have customers who refuse outright to pay money owed.

As the economy begins to restart, these financial pressures are hindering the ability of SMEs to get back to business. 14 per cent of SMEs have been forced to turn down new business as the money they need to buy raw materials is wrapped up in unpaid invoices, and one in 10 (11%) have had to keep staff on furlough who they need to bring back to complete work.

David Postings, Chief Executive of Bibby Financial Services, said: “It is really sad that SMEs are leaving work on the table when the country needs them firing on all cylinders. Invoice finance is a critical tool in helping SMEs to manage their cash flow and smooth out the degradation in payment practices that they are facing.

“The bounce back loans that many businesses have taken, while providing a short term fix, will need to be repaid. Invoice finance, on the other hand, is a much more flexible option and increases as a company grows. Business owners should be looking to match the funding to their assets to avoid more cash flow pressure down the line.”

While there is a clear economic cost to SMEs, there is also a personal one. SME owners are struggling to balance the financial pressures of the pandemic with their own wellbeing with a third (34%) admitting to not having a single day off since the start of lockdown and 27 per cent citing a deteriorating work life balance.

The research shows that 56 per cent of SMEs will be unable to meet their running costs beyond 12 months as poor payment practices complicate already stretched supply chains. Nearly a quarter (22%) of UK SMEs have lost a supplier already due to the business closing and 12 per cent admit to delaying a payment to a supplier in an attempt to manage cashflow.

David added: “Everyone likes to talk about SMEs being the backbone of the UK economy and they clearly have a critical role to play in the country’s economic recovery, but too often we lose sight of the people that run and work in them. There are 5.9m SMEs in the UK, often employing fewer than 10 people, and for businesses of that size, it’s personal.”

“One of the things we pride ourselves on at BFS is the relationships we develop with the businesses we support. The pressures facing SME owners have always been high, but the pandemic and continued poor payment practice in the UK are raising them to unsustainable levels.”

COVID-19 creating capacity crunch for creditors – comments

“The current pandemic has had a damaging impact on many people’s finances. The pausing of different areas of debt collection and enforcement has provided a temporary solution, but without immediate action to address the looming bottleneck, it’s very likely creditors will struggle to cope with the increased volumes of customers in need of urgent help once collections resume.

“While the temporary cessation of debt collection activity, across both the public and private sectors, did provide some much needed breathing space, it doesn’t address the core problem of whether people will be able to pay when collections restart. The can has been kicked down the road, and creditors need to plan for the expected surge in activity.

“The key issue will be how to scale up their staffing capacity quickly enough to prepare for the elevated workload in their collections teams. With offices and call centres requiring social distancing measures, the task of increasing staffing and training becomes much more complicated and costly. Problems that lie ahead include long wait times into the contact centre and perhaps less effective interaction with customers who need help.

“This will impact the standard of collections activity at the very time when customers need fast and empathetic support. Creditors must put in place sufficient capacity and shouldn’t wait until collections start to resume, otherwise they may simply increase the pressure and stress on already financially vulnerable customers.”

Carlos Osorio, Director of UK Debt Recovery at TDX Group, an Equifax company

July corporate and personal insolvency figures, R3 response

Corporate insolvencies in England and Wales increased by 29% when compared to June 2020 but are 34% lower than in July 2019.

Personal insolvency numbers in England and Wales decreased when compared to June 2020 (12% lower) and July 2019 (40% lower).

Colin Haig, President of R3, the insolvency and restructuring trade body, comments on today’s publication of the July corporate and personal insolvency statistics: “The month-on-month rise in corporate insolvencies in July is largely down to an increase in administrations, Compulsory Liquidations, and Creditors’ Voluntary Liquidations (CVLs). Although overall numbers remain low in comparison to the same time last year, this uptick could suggest that the pandemic might now be starting to be seen in the insolvency figures.

“On the personal insolvency side, this month’s decrease has been driven by a reduction in the number of Debt Relief Orders (DROs), and Individual Voluntary Arrangements (IVAs). Bankruptcies have increased slightly, due to a small rise in the number of debtor applications, but they are still well below pre-pandemic levels.

“It’s important to note that although today’s statistics suggest the pandemic is starting to affect corporate insolvency levels, the Government’s continued support for businesses and consumers means we’re not much nearer to understanding how COVID-19 is truly affecting underlying corporate or individual distress than we were last month.

“However, all the signs point to a tough road ahead. The UK has entered a recession, consumer confidence is low, and a number of big-name brands have recently announced they are exploring or have entered insolvency or restructuring procedures.

“This suggests the business climate will be challenging in the foreseeable future – and will not be made any easier as the Government support packages begin to wind down.

“Our members are telling us that it may not be long before companies which would be viable under normal circumstances begin to seek support from an insolvency and restructuring professional, as a result of the impact of the pandemic.

“This may lead to an increase in requests for personal insolvency support if people lose their jobs or agree to take on liability for a business’s debts as part of an unsuccessful attempt to turn it around.

“Another factor that may also affect personal insolvency numbers is the ending of the various payment holidays that are currently available – especially if people’s incomes haven’t returned to the level they were at before the pandemic began.

“Our advice to anyone who is worried about their personal or their business’s financial health is to seek advice from a qualified professional as soon as they start to see signs they might be in trouble. Doing so will give them the best chance of turning their situation around – and more options and more time to take a decision on how they move forward.”

Ascendant Introduces Payment Tracking Through SWIFT gpi

TORONTO — AscendantFX Capital announced today that they have become members of the SWIFT network, and more specifically the Global Payment Initiative (gpi). Ascendant will leverage SWIFT gpi to further enhance its customer platform aPay and its API capabilities, improve payment delivery, and provide greater transparency for customers.

SWIFT gpi provides end-to-end transparency on fees related to both deductions and exchange rates. This includes the final amount paid to the end beneficiary and the transmission of full and unaltered remittance information, which eases the reconciliation of payments. Ascendant also expects to see a significant reduction in the number of payment investigations and time taken to resolve these investigations.

“We are always looking to provide our customers greater clarity into the payment journey. We plan to use the data SWIFT gpi provides to route payments in the most effective, efficient way possible. SWIFT gpi’s technology is revolutionary for the payments industry and gives power back to the customer,” said Shemina Jiwani, Chief Operating Officer for AscendantFX.

Tracking payments like a parcel has been a long-standing request from Ascendant’s customers and partner-led innovation groups. To take it a step further, Ascendant is making this data accessible to customers within their online platform, aPay, as well as through their robust API solution, aPay Link. Ascendant is at the forefront of innovation in the sector and will continue to drive innovation based on customer needs.

CSA Confirms Date for its 2021 Conference and reports success of new Virtual Members’ Meetings

The Credit Services Association, the voice of the debt collection and debt purchase sector, has confirmed the dates for its 2021 annual conference – UK Credit and Collections Conference (UKCCC) – which will be held at Newcastle Crowne Plaza on Thursday 9 September 2021.

It has also reported the success of its first Virtual Members’ Business Update event, one of a series of virtual events which brings together a host of expert speakers who deliver bitesize presentations on specialist subjects and then expand on these at weekly meetings which follow, giving attendees the time to share details with colleagues who would benefit from attending.

Colleen Peel, Head of Marketing and Events, says the Association successfully moved its event schedule online in March: “We have been delivering at least one online member event each week since lockdown, and used the crisis as an opportunity for us to check in with members and give them a platform to share information and learn how others are operating during the pandemic.”

The new Business Update events were introduced to broaden our offerings over and above checking in with members. They offer a host of expert speakers on specific topics of interest to members firms and we have so far covered topics such as GDPR, staff mental health and wellbeing, HR responsibilities, the Senior Managers and Certification regime (SMCR), Business interruption insurance and more. “We are then building these presentations out by inviting speakers back to expand on their subject areas at a longer, dedicated meeting,” she adds.

Other virtual events in the coming months include our popular CSA Compliance meetings and Regulation roundtables which will continue to run (virtually) throughout October and November.

The CSA is also considering the format for its second People Development Conference, expected to take place in the first half of 2021, following the success of the first conference held in Leeds in March this year. A virtual conference in place of the postponed UKCCC 2020 is also being discussed.

European leaders in voice recognition technology to help businesses boost productivity in the UK

At a time when organisations are under heightened time and cost pressures and privacy is once again in the spotlight, Cedat85, a European leader in voice recognition technology, is helping businesses to boost productivity and security with the launch of Cabolo – a smart voice recognition technology and ecosystem that records and transcribes in real-time.

Cabolo’s research highlights that almost half (45%) of organisations regularly hold meetings which contain sensitive information. The portable, standalone unit – which doesn’t require an internet connection – was developed in response to businesses’ need for a completely private, secure and ‘off grid’ device that provides peace of mind and an alternative to the cloud-based solutions offered by the tech giants.

And with more than a fifth of UK organisations spending hours transferring notes and outcomes from meetings, Cabolo promises to save valuable time through its intelligent, proprietary software. It is the only customisable solution that uses speech recognition to record and transcribe meetings – face-to-face or virtual – in real-time. It also enables organisations to organise, archive and quickly retrieve any previous meeting recording, transcription or minutes with the aid of a powerful full-text search engine.

Already tried and tested by many companies – including North Warwickshire Borough Council in the UK and Fiat Chrysler Automobiles (FCA), Intesa Sanpaolo and Illy in Italy – Cabolo can be customised to transcribe multiple languages, with specialised vocabularies for various sectors or accents. It can also plug in to existing conference systems, provide live subtitles and can be used for board meetings, interviews, training and more.

Parent company Cedat85 is an independent award-winning technology company and service provider. It was featured in the 2020 Gartner Market Guide for Speech-to-Text Solutions and listed in the top 11 world-wide players for Speech to Text applications and in the top 5 in Europe (Gartner’s Competitive Landscape: Speech-to-Text Applications 2018).

Lexacom, a recognised player in speech solutions, has been appointed by Cedat85 as the exclusive distributor in the UK, where Cedat85 operates with its fully owned subsidiary Speech-I Ltd. in London.

Enrico Giannotti, Managing Director at Cedat85, comments: “We know businesses have a real need to make meetings more productive, secure and inclusive, which is why we’re excited to launch Cabolo in the UK market. While there are many solutions for live transcriptions in the market, Cabolo’s solution and combination of benefits to organisations is truly unique – it’s a simple, smart and secure solution for recording and transcribing meetings that has been developed in response to customers’ desire for a high quality, private, non-cloud-based solution.

“We have over 30 years’ heritage and experience in this sector. We are specialists, with a specialist, independent and leading product. Indeed, we already have some great success stories from well-known organisations in Europe and are now piloting the device with some very high-profile British organisations.”

Dr Andrew Whiteley, Managing Director of Lexacom said: “Lexacom are delighted to be working with such this incredibly innovative and exciting solution. Cabolo has the potential to revolutionise how conversations are documented. There are no limits to its application; from the HR meeting to the board meeting, from the university lecture to the courtroom.”

CIVEA offers reassurance with new animated guides

CIVEA, the principal trade association representing over 95% of civil enforcement agencies in England and Wales, has released two new videos to help explain why the pending return to enforcement is both safe and fair. The animations are available now and are free to view by local authorities (LAs) and the general public on the CIVEA website.

From Monday 24th August 2020, Enforcement Agents, or EAs (formerly known as bailiffs), will be permitted to visit UK properties again for the first time since lockdown measures were implemented by the Government; but misconceptions around the rules of visiting debtors and the reality of which types of debt will be collected, has left some people unduly worried, until now.

‘COVID-19 Safe Working Practices’ is a video that was initially devised to train EAs preparing for a return to work. This has now been shared openly to reassure councils and the general public that enforcement visits are safe and sensitive. CIVEA requires all EAs to undertake mandatory CIVEA-approved training , covering the effective use of PPE, social distancing and protecting themselves as well as those they encounter. It is hoped by sharing this short animation that debtors will also learn and understand what to expect from a visit, for example, under a voluntary agreement EAs will not enter homes to take control of goods unless there are exceptional circumstances.

The second video, ‘CIVEA Guide To Enforcement’, gives a wider context that explains the enforcement process and what this means for the local community; including funding for local services such as adult social care, police and fire services. This video aims to provide an informative and easy access reference point, so that the typical enforcement process and debtor rights are explained without the need to read through pages of complex legislation.

Despite a five month suspension of visits, efforts have been made to reconnect with people with overdue debts and those who have missed repayments A standardised reconnection letter, devised by CIVEA and sent to all people in debt to their local authority forms part of a post-lockdown support plan. This includes a vulnerability identification phase to identify any additional needs of people affected by the COVID-19 pandemic.

The majority of people have continued to meet their repayment plans throughout the coronavirus pandemic, suggesting that payments are both fair and affordable. Russell Hamblin-Boone, CIVEA Chief Executive Officer, says the reality of returning to enforcement means collecting historic debts. Debts accrued during lockdown will, in most cases, not yet been processed by the courts. He said,

“We have released these new animations to show that the industry is simply getting back to work. At the end of August, the vast majority of visits taking place will be to enforce fines, traffic offences and other penalties that have been outstanding since before the coronavirus lockdown came into effect. We are aware that some people will be in financial difficulty and there will not be a sudden rush of enforcement visits, but it is only fair that those with outstanding debts have the opportunity to pay and ensure councils get the funds owed to them at a time when it is needed most.

“Our data suggests that councils are concerned about funding shortfalls and the majority have agreed how and when enforcement visits can resume. Safety remains the number one priority across the industry and as our videos show, a comprehensive training programme for almost 2000 agents has been implemented to ensure a visit from an EA will carry no more risk than receiving a grocery or parcel delivery. I would implore anyone who is concerned to view our latest videos and be reassured that enforcement activity will be both safe and fair.”

CIVEA’s members continue to enforce civil debt on behalf of local authorities and Her Majesty’s Courts and Tribunals Service (HMCTS) including council tax, business rates, parking fines, magistrates’ court fines, employment tribunal awards, child support payments, B2B and commercial rent arrears.

New app to support the financial wellbeing of IVA and DMP customers

Financial Wellness Group has today launched a new app to make it even easier for its IVA and DMP customers to manage their financial wellbeing using their mobile device.

The new app, which is free for customers to download and use, is available for Apple and Android devices. The app will become a vital way for customers to access the full range of financial wellbeing support available to them from Financial Wellness Group.

Whilst customers’ debt solutions will, of course, be at the heart of the app, they’ll be able to access additional services to support their financial wellbeing and help them manage their money.

The home screen features a personalised dashboard giving customers an overview of the progress of their IVA or DMP at a glance, and tools to manage their solution. From there they can also access a broad range of wellbeing services including:

  • discounts on shopping – covering everything from supermarkets and clothing to DIY and homewares, gadgets, toys, fuel, bikes and much more. Most discounts can be used both instore and online.
  • free video or phone consultations with a General Practitioner, or chat with a doctor via email. The doctors are UK Care Quality Commission regulated and can issue private prescriptions and fit notes.
  • access to specialist phone or online counselling services, for those that need support with their mental health.
  • specialist help with legal, employment, housing and consumer issues.

Many more features are already in development and will be rolled out over the coming months.

Jody Goodall, Chief Technology Officer of Financial Wellness Group said: “we’ve developed our new app in response to demand from our customers, and already had great feedback from the those that have trialled it.

“For customers that want to communicate with us digitally, the app will enable them to self-serve for many tasks on their debt solution. But our vision for the app goes far beyond that and it will support our customers with an end to end money-management hub, which customers will use to access services that will support them in improving their financial capability and developing a ‘healthy financial lifestyle’..

“Of course, we understand that for many customers, particularly those that are vulnerable, the human re-assurance that speaking to a member of our team can give is vital. Our digital services will sit alongside the personal service that we provide over the phone.”

EQ Credit Services delivers digital loan management platform for MYJAR

EQ Credit Services (EQCS), the UK’s leading consumer credit technology and outsourced services provider, today announces it has delivered a flexible loan management solution for direct online lender, MYJAR.

MYJAR is a responsible lender which helps customers facing temporary financial shortfalls, offering loans from £100 to £2,000, repayable over three, six or twelve months. EQCS worked with the lender to quickly replace its existing, outdated loan management system with EQCS’ API-led platform. The installation was completed in less than six months and is now fully integrated into MYJAR’s in-house origination system, resulting in a fully scalable, flexible end-to-end solution. MYJAR is now able to leverage EQCS’ scalable platform, including a digital self-service environment to improve customer experience and flexibly support customers’ repayment journeys.

“The partnership between EQCS and MYJAR is a real alignment of values,” says Caroline Walton, Group Chief Executive, MYJAR. “We’re both committed to using digital technology to underpin responsible lending and provide exceptional levels of customer experience. We have been impressed that EQCS was able to step-in at such short notice to transform our loan management and collections capabilities in under six months. Not only can we now provide our customers with the tools to conveniently make payments and manage their accounts online but we now also have EQCS’ fully scalable platform providing us with the tools to launch new products and services with speed and ease.”

Richard Carter, Managing Director, EQCS, adds: “We are delighted to be working with dynamic online lender, MYJAR, to underpin its loan management function. Like MYJAR, we also focus on a digital-first approach to loan functionality. Our cost-effective, API-led solution is enabling lenders to enhance automation, customer self-service and operational scale and efficiency, while remaining compliant with regulation.”

In addition to working with EQCS – which is part of the international technology-led services and payments specialist EQ (Equiniti Group plc) – MYJAR has chosen EQTek to support its IT services function out of its Krakow-based technology hub.

Cabot Credit Management Releases Earnings for Second Quarter of 2020

Cabot Credit Management (Cabot), a market leader in European credit management services, today announced the financial results for six months ending 30 June 2020.

Highlights

  • Carefully managing the business to protect our employees, our customers and our investors
  • Delivered Adjusted EBITDA of £342m over last twelve months
  • Adjusted EBITDA margin in Q2 2020 of 62.6%
  • Maintaining positive cash flow generation and strong balance sheet

Craig Buick, Chief Executive Officer, Cabot Credit Management, said: “I am incredibly proud of the way our employees have adapted to this new way of working to ensure they have been there for our customers during this unprecedented period.

“Our second quarter results demonstrate the strength of our business, with positive free cash flows and our Adjusted EBITDA margin maintained at 62.6% in the quarter.

“Our balance sheet remains strong as a result of our recent strategy, with significant covenant headroom, available liquidity of £254.6m, no debt maturities before late 2023 and leverage at 3.9x. We remain committed to delivering on our leverage target of 3.0-3.5x, over the medium term.

“We continue to monitor the market conditions evolving around us and will continue to adapt our business as required in order to deliver long term successful outcomes for all of our stakeholders.”