The Scourge of Late Payments Still Remains

‘Not enough companies take late payments seriously’. That was the message from insolvency and company rescue specialists Forbes Burton following last week’s Spring Statement.

Buried towards the end of Chancellor Philip Hammond’s latest economic statement announcement last week was a detail that was somewhat overshadowed by the concern over Brexit.

Rick Smith, MD at Forbes Burton said: “In his statement to the house, there was some news to take comfort in. Widespread investment, some announcements on technology and an acceptance that Brexit talks should have moved on by now was good to hear, but many may have missed a key piece of news for business.

“Late payments have been a scourge for SMEs for a long time and we’ve seen many affected in the recent past by issues such as the collapse of Carillion. Contractors, labourers and those who perform short-form work often have problems with cash flow due to money owed not arriving in time. Many are often on the precipice thanks to waiting for overdue invoices to be paid.”

Rick explains that the announcement now means larger companies have to report their payment terms, meaning those who routinely stretch out payments beyond their stated terms will have their details laid bare via portals like Companies House.

Rick added: “While this is great news and companies wanting to deal with larger firms can now realistically see cash flow figures, it doesn’t do enough to make much of a difference. While the FSB has been fighting a ‘Fair Pay, Fair Play’ campaign honourably, to tighten regulations and to encourage measures to put paid to this shameful process, it’s a shame that this announcement doesn’t cut deeper.

“Too often we see companies go to the wall due to a large contract going unpaid or being paid too late. This kind of practice is shoddy and it needs to stop.

“Reporting only goes so far. In a similar way, reporting of executives who earn over a certain threshold is mandatory and it appears when checking on a company’s credentials but nothing is restricted as a result. If companies faced penalties for this kind of issue then it would be taken a lot more seriously.”

Rick adds that the FSB has also called for Project Bank Accounts that solve the problem of late payments by acting as holding accounts.

“This kind of security would prove useful for many companies, especially smaller SMEs who struggle regularly with issues such as this.”

New programme reveals the vital role of credit management for SMEs

The Chartered Institute of Credit Management and ITN Productions Industry News launch “Credit Experts”, a news and current affairs-style programme exploring the evolving credit landscape – from new technologies and artificial intelligence solutions for managing customer outcomes to essential guidance for small and medium sized businesses.

Credit affects both businesses and consumers. For businesses, and especially SMEs, access to credit is critical; SMEs contribute more than £200 billion a year, with this number expected to grow almost 20 per cent by 2025 however many SMEs suffer from cash flow volatility. For consumers, the ability to access credit is similarly critical and directly supports economic growth.

“Credit Experts” addresses the latest developments in both commercial and consumer credit. It aims to help SMEs achieve sustainable growth by raising awareness of new innovations and best practice, providing cashflow guidance and highlighting knowledge vital to business success. It helps those involved in consumer credit to learn about the latest thinking in identifying and managing vulnerable customers, showcasing the leading customer focused technology that is changing the face of debt recovery.

In an interview Phillip King, Chief Executive of CICM, explains the Institute’s commitment to equipping professionals for a career in credit management, outlines the help available to small businesses through CICM and highlights the benefits of the CICM membership.

Philip King, Chief Executive of CICM said: “Credit professionals play a vital role in multiple areas of commercial and consumer credit, delivering expert knowledge, advice and services that support economic growth and best client/customer outcomes. ‘Credit Experts’ focuses on some of the most recent examples of best practice and new technology, providing a ‘snapshot’ of an industry that continues to innovate and evolve.”
Vicki Clubley, Interim Head of Industry News, ITN Productions said: “We are delighted to be partnering again with CICM to highlight the importance of good credit management for SMEs. We hope the programme engages members and the wider financial community and encourages opportunities for collaboration and innovation for the future.”

Aspen Bridging increases maximum loan sizes up to £4m

Aspen Bridging has increased its maximum loan sizes up to £4m net for portfolios and £2m net on single properties with immediate effect.

The decision – which marks a major increase from the previous limits of £1.5m net for portfolios and £1m net per property – will help the firm expand its offering into larger scale capital raising on portfolios, auction purchases and conversion projects, areas where the business has already demonstrated its expertise.

In addition it will open Aspen up to a larger scale of developer exit loans for those seeking to get access to strong leverage with rapid and reliable finance provision from wind and water tight onwards.

The resolution to increase the maximum loan size was announced on the back of broker research into the firm’s customer service which praised its performance but ultimately questioned existing lending limits.

A total of 77 broker firms were asked, ‘what do you think of our max loan size of £1.5m?’ In response 48% said that the figure was too low to which Jack Coombs, Director at Aspen Bridging said the company would take “immediate action”.

“We promised a quick resolution, and having been made fully aware of the survey results it took us just four working days to call a meeting of the Executive Directors and agree to increase our maximum loan sizes substantially,” he said.

“The decision – which represents a 166% increase on portfolios and 100% on single properties – shows just how rapidly we can adapt to feedback and indicates our strong appetite to lend to both new and existing customers.”

Research comments from Chris Whitney and Callum Taylor at Enness stated ‘best service provided by any lender by a country mile, however loan sizes are too small’, while Alex Vickery at Y3S wrote ‘best bridging lender I have ever used’, but went on to say the firm ‘needs capacity to do bigger loan sizes’.

Other key results from the survey included the company’s service which was rated as excellent or good by 100% of respondents, with LTVs considered market leading or sufficient by 99%. Rates were considered competitive by 92% and procuration fees judged fair by 95%.

The company recently revealed its time-based service excellence targets, which shows that the company aims to take the majority of business from enquiry to completion in just 3 to 10 days.

Since its inception in 2017, Aspen Bridging has forged a successful loan book and a burgeoning reputation for service excellence, speed and flexibility.

Key business attributes include one person per case, quick and accurate quotations, site visits from the experienced underwriting team to every property at valuation stage and completions from initial enquiry as fast as any in the industry.

New platform helps SMEs manage their cash flow

A new online platform built by a team of ex Forbes FinTech 50 CTOs and CEOs promises to help start-ups and small businesses manage their biggest risk factor – cash flow.

According to a study conducted by USB, 82% of small business failures can be attributed to poor cash flow management, or poor understanding of how cash flow contributes to business. This makes cash flow the number one reason that small businesses fail.

Avrium is designed for SMEs to better understand their financial position and potential risks to their cash flow. Businesses can access key credit data provided by Creditsafe, offering insights into the financial health of customers and suppliers. There are also a range of tools to help mitigate these risks, such as invoice financing and debt collection services through partnerships with Atradius Collections and Accelerated Payments.

The web application plugs in to the market-leading cloud-based accounting software to offer a one-stop solution for cash flow management. Avrium are recognised Xero and QuickBooks partners.

Avrium is the first tool launched by Atom Ventures, a group of experienced technical founders who came together to provide strategic technology and operational advice to start-ups and SMEs who want to use technology to grow at scale.

Bhairav Patel, CEO of Avrium, said: “It’s very clear how crucial cash flow awareness is for the health and growth of most SMEs. As a director, even if you’re not directly responsible for book-keeping, it’s crucial that you understand what is happening with your incomings and outgoings.

“From the start we wanted to build a cash flow management solution that any business owner could use intuitively to insulate and protect themselves from the big unforeseen risks – a major customer reducing orders, or a supplier increasing costs. Then we integrated global best-of-breed products that would help to give them more control of those relationships.”

Nucleus Commercial Finance strengthens capabilities in the North West

Nucleus Commercial Finance has increased its presence in the North West, with two new appointments, enabling the business to further support SMEs in the region with the finances they need to support growth.

Dave Rushton joins as Sales Director and will be developing new opportunities and strengthening the capabilities of the asset-based lending team. Stuart Harland has been appointed as Business Development Executive and will further support the regional focus and develop new business opportunities. His focus will be across Business Cash Advance, Cash Flow Finance and Property Finance.

Chirag Shah, CEO of Nucleus Commercial Finance, said: “These key appointments strengthen our capabilities in the North West and demonstrate our commitment to the North West. As a thriving area of the UK, with its ambitious businesses driving the Northern Powerhouse, we will be supporting these businesses with the finances they need, to achieve their ambitions.

“Dave and Stuart bring many years of experience, working with clients across a range of sectors, and they will further strengthen our capabilities of providing innovative solutions to clients with complex funding needs.”

With over twenty years’ experience in invoice finance and asset-based lending, Dave joins from Leumi ABL where he was responsible for business development. He has previously held roles at Shawbrook Business Credit and ABN AMRO Commercial Finance, working in client relationships and underwriting.

Stuart joins from Capify, where he was Sales Executive and helped to support businesses across the UK gain access to capital. He has over ten years’ experience working in sales and business development roles, with roles at Airport Angel Limited and CPP Group.

Dave Rushton, Sales Director, said: “Nucleus Commercial Finance has an excellent reputation of driving innovation in the asset-based lending industry. It is refreshing to see a positive approach in creating intelligent, workable solutions to often complex problems.”

“Having worked in the North West for a number of years, I look forward to starting the next chapter of my career to help provide businesses with the solutions they need to grow in a challenging market.”

Stuart Harland, Business Development Executive, commented: “I am thrilled to be joining Nucleus and to be part of the team bolstering financial support for SMEs in the North West. All too often, businesses are not given access to the type of funding they need to grow, I am excited to draw on Nucleus’ scale and breadth of products to offer finance to businesses and support them in their ambitions.”

Both, Dave and Stuart, will be based in Manchester.

FSB: Procurement reforms yet to deliver for Scottish smaller firms

Scottish procurement reforms are failing to help smaller businesses win public contracts, a new report from the Federation of Small Businesses (FSB) has revealed.

According to FSB’s research, only about a fifth of Scotland’s £12 billion procurement budget goes directly to small businesses, even though they account for 98 per cent of Scotland’s business community. The proportion of contracts won by smaller firms is largely unchanged since 2011, show figures sourced from the Scottish Government, despite legislative and administrative reforms designed to improve small business success.

In the report, called ‘Broken Contracts: smaller businesses and Scottish procurement’, FSB challenges Scotland’s public sector to increase spending with the smallest businesses by the end of this Scottish Parliament term.

Andrew McRae, FSB’s Scotland policy chair, said: “Over the last decade we’ve seen a slew of laudable procurement reforms in Scotland. Unfortunately, they seem to have had little impact on the share of work won by smaller firms.

“That means that we’re failing to use the full potential of public sector spending power to develop our local economies.

“In this new report, we ask Scotland’s public sector decision-makers to carefully measure how they’re contracting at the moment and develop realistic action plans to improve spending with local business. That might mean attaching proportionate terms and conditions to contracts, or breaking a giant contract into bitesize lots, or working with other local public bodies to stimulate local supply.”

The small business campaign group’s report comes as speculation mounts regarding the impact of the failure of outsourcing giant Interserve and on the back of the anniversary of Carillion’s collapse.

In addition to arguing that more work should be won by local, smaller firms FSB argues that additional action should be taken by the Scottish Government to encourage fairer and more sustainable public sector supply chains.

In a bid to tackle the problem of late payments, FSB argues that big businesses bidding for major Scottish contracts should assign responsibility for payment practice and supplier relationships to a non-executive director. Further, they argue Ministers should investigate what more could be done to encourage large primary contractors to upskill their smaller suppliers.

Andrew McRae said: “Across the UK, a small number of big businesses are very good at winning at public contracts. But that doesn’t mean that they’re run well or treat their supply chains fairly. The Interserve and Carillion debacles reinforce the case for a change in procurement approach.

“While our top priority is for smaller firms to win more work, Ministers also need to ensure that big primary contractors treat their sub-contractors with respect.

“With thousands of Scottish businesses going under every year as a consequence of late payment, Ministers should do everything in their power to help end this scandal. Further, we’re making the case for action to boost supply chain skills-development to give Scottish productivity a much-needed lift.”

The number of Scottish businesses winning work from their local authority has plunged over the last decade. In 2008, 51,312 Scottish firms supplied their local councils – figures collected by the Improvement Service reveal – but by 2017 this number had dropped to 29,910.

The report reveals that, with a stronger focus on working with suppliers, public bodies in Manchester increased the share of procurement spending going to local small and medium sized firms from 47 per cent in 2014/15 to 62 per cent in 2017/18. There has been similar success in Preston.

FSB makes the case for Scottish public sector organisations to adopt a similar approach, making the case for enhanced co-operation between different public sector bodies when trying to boost local purchasing in an area.

Andrew McRae said: “City leaders in Manchester have successfully managed to shift the spending dial. That means it can be done north of the border. In our study, we make the case for all of the public purchasers in a geography to club together to stimulate demand and develop local supply chains.”

Case study – Greystone, East Kilbride

Greystone is a 25 year old East Kilbride based facilities management support business and provides a wide range of services to local public and private clients. They win some public contracts, but highlight how burdensome the process can be.

Craig Smith, Greystone’s managing director, said: “We have to carefully choose which public contracts we’re going to spend the time bidding for, not because we can’t do the work, but because the tendering process is so resource intensive.

“It can feel like the system is stacked against smaller operators. I know that there are rules which have to followed, but there must be a way to make it easier for firms without huge bid teams.”

Case study – Word Up Communications, Glasgow

Word Up Communications is a Glasgow-based media and communications training and consultancy firm. They fear that Scotland’s public sector could be failing to get the best value goods and services because their procurement systems effectively exclude smaller firms.

Mairi Damer, founder of WORD UP Communications, said: “As a sole trader (and former local authority worker) who actively wants to be able to support critical public services, the much-vaunted political commitment to making sure that small businesses benefit from a transparent, accessible procurement system simply rings hollow.

“Maddeningly, the complexities and time commitment required by the procurement system mean that micros like mine simply cannot compete. And that’s a great shame because now more than ever the public sector could really do with the support of skilled, cost-effective businesses like mine.”

Invoice Finance creeps back to growth in 2018

Equiniti Riskfactor, the leading provider of risk management and fraud analytics software for the global commercial finance market, finds that invoice finance and asset-based lending returned to growth in the second half of 2018, through analysis of UK Finance’s industry statistics.

Total advances at the end of December 2018 totalled £22.7b, up over £100m from the previous quarter and up 2.4% (over £500m) on the previous year. This growth follows two consecutive quarterly declines in the balance of advances in the first half of 2018.

Aaron Hughes, Managing Director of Equiniti Riskfactor, believes the figures demonstrate the durability of the industry and the increasing prominence of borrowing for companies in the services, manufacturing and distribution industries.

“Invoice finance plays a critical role in giving growing companies’ cashflow and allowing them to re-invest this capital back into their business as quickly as possible. It is therefore unsurprising that it continues to be regarded as the optimal way of funding business growth as the lending is directly linked to, and secured on, their customer’s sales ledger.

“The economic uncertainty and market volatility over the past year has been well documented, but after a little wobble at the start of the year it is promising to see businesses are still prepared to take advantage of this borrowing.”

Larger companies, those with an annual turnover of £100m or more, continue to drive borrowing. The balance for invoice finance and asset-based lending for these companies is £7.6b. This accounts for a third of all lending (33%) despite larger companies representing just 1% of borrowers. As of the end of December 2018, 429 companies with £100m or more in turnover used invoice finance or asset-based lending, up from 405 a year earlier.

In contrast, the balance of lending saw an annual decline for companies with a turnover less than £10m, who may perhaps be more susceptible to economic uncertainty and fluctuations in currency.

Looking ahead to 2019, Aaron Hughes believes the market should be set for further expansion especially if the UK manages to leave the EU in an orderly fashion.

“There is no doubt that the ongoing Brexit negotiations are not helping businesses to plan ahead. Invoice finance is particularly helpful for companies in industries that are being impacted most severely – services, manufacturing, distribution and transport – if the UK can strike a good deal and achieve a degree of certainty there is no reason why we shouldn’t see continued business demand for invoice finance and asset-based lending.”

False insurance claims rise 27% across the UK in the past year

Today, Cifas, the UK’s leading fraud prevention service with over 450 members, has released new figures showing a marked increase in the number of individuals committing insurance fraud with false claims. Between 2017 and 2018, there has been a nationwide increase of 27% in fraudulent insurance claims.

The new figures reveal that Cifas members identified household insurance fraud and motor insurance fraud as the two biggest causes of false claims – with a 52% and 45% increase respectively.

Meanwhile, there is an overall decrease in another form of insurance fraud: fronting an insurance policy. Fronting is when a driver claims they are the main user of a vehicle that is actually driven by a young driver or other high-risk motorist in order to receive lower premiums: for example, by parents for their children. Cifas members reported over 300 cases of fronting in 2018, with the data showing an 18% increase in the proportion of 21-30 year olds conducting this type of fraudulent activity.

The release of these alarming statistics marks the launch of Cifas’ ‘Faces of Fraud’ campaign. The campaign sheds light on the daily temptations consumers face to commit fraud: the lies, exaggerations, deceptions and “seemingly” harmless opportunities to make some quick cash or get a better deal that are actually criminal acts.

Cifas is therefore urging people to stop, think and consider the consequences of making false insurance claims or fronting insurance policies – which can be far more serious than many imagine. Consequences can include non-payment of claims; cancellation of the insurance policy; individuals having to pay costs that arise from an accident; a record with Cifas and the Insurance Fraud Register (IFR), making it more difficult to obtain insurance and other financial services. The case could also be reported to the police for investigation: potentially leading to a criminal conviction and a prison sentence.

Chief Executive Officer of Cifas, Mike Haley, says: “False insurance claim fraud and fronting insurance policies fraud are often seen as an easy way to make a bit of money without hurting anyone. Yet the idea that fraud is a victimless crime is completely false. First, false insurance claims and fronting insurance policies are illegal. They can impact your life and career, making it near-impossible to buy insurance in the future and can even lead to a criminal record. Second, committing fraud hurts everyone: your neighbours, your friends, people in the area, and the UK as a whole. Insurers have to spend longer reviewing insurance claims and policy requests, premiums go up, and everyone loses out.”

“As the rise of false claims in household and motor insurance shows, many people are seemingly unaware of the risks they’re running and the consequences it can have by committing everyday fraud. While the overall downturn in fronting insurance policies is a positive sign, the fact that young people are increasingly more likely to commit that type of fraud highlights the need for continuing education. More needs to be done to raise awareness about the harm of fraud and financial crime.”

SME work-life balance impacting personal relationships

Eighty per cent of business owners admit they worry their work-life balance is negatively impacting relationships with family and friends, research today reveals.

To compound the issue, more than a third (36%) of UK SME leaders feel that they struggle to spend enough time with their children, with 46 per cent having missed a special occasion and 41 per cent having missed or cancelled a family trip.

The research, released today by independent SME funding partner Ultimate Finance, highlights a worrying trend for small business owners feeling they don’t have the necessary support available to achieve a healthy work-life balance.

Steve Noble, Chief Operating Officer at Ultimate Finance, said: “Wellbeing is often in the headlines, but the focus is rarely on small business owners. Given so few of them feel that they have the capacity to achieve a healthy work-life balance, there is clear evidence that more support is needed. Central legislation to ease the bureaucracy of running a business, national and local investment in support services for SMEs and more readily available advice on where to turn when things are getting too much are all examples of ways that government and the broader business community can come together to tackle this challenge.

“With the necessary support in place, business owners can find the balance between striving for success in their professional lives and also enjoying well-earned quality time with friends and family. It’s also then more likely to positively impact employees too, as a leader that understands the importance of wellbeing can put measures in place to ensure the workforce is enjoying a healthy work-life balance too.”

This study shows the important role wellbeing has in a resilient business. This is why Ultimate Finance has created an information hub with insight and guidance on a range of topics to help companies that are looking to build their resilience.

Aspen’s service praised and loan sizes questioned in broker survey

As part of its service excellence programme, Aspen Bridging has undertaken its first broker survey which has praised the firm’s performance but questioned its current maximum loan size.

In total 77 individuals responded, key results included the company’s service which was rated as excellent or good by 100% of respondents, with LTVs considered market leading or sufficient by 99%. Rates were considered competitive by 92% and procuration fees judged fair by 95%.

Importantly the business asked, ‘what do you think of our max loan size of £1.5m?’ Here 48% said that the figure was too low. At present the business has a maximum loan size of £1.5m for portfolios and £1m on single properties.

Chris Whitney and Callum Taylor at Enness wrote ‘best service provided by any lender by a country mile, however loan sizes are too small’.

Alex Vickery at Y3S agreed stating ‘best bridging lender I have ever used’ but went on to say the firm ‘need’s capacity to do bigger loan sizes’.

Ed Wylie at F4B also reported ‘great service but there would be more opportunity I feel with a larger max loan amount’.

Jack Coombs, Director at Aspen Bridging, said: “Naturally we are delighted that our service excellence targets are all being achieved and widely recognised by the broker community, but of course we want to do more business and to meet our customer needs in terms of larger loans.

“We will be taking immediate action on this point, a meeting has been arranged with the Executive Directors where all the findings can be openly discussed and we will decide if our loan size criteria can be adapted.”

Last week Aspen Bridging revealed its time-based service excellence targets, which shows that the company aims to take the majority of business from enquiry to completion in just 3 to 10 days.

Given the right conditions – including immediate valuation and legal payment, no building surveyor, property access and quick response times from the clients and their solicitor – the decision is supported by figures showing 81% of cases are currently completed within 10 working days.

Since its inception in 2017, Aspen Bridging has forged a successful loan book and a burgeoning reputation for service excellence, speed and flexibility.

Key business attributes include one person per case, quick and accurate quotations, site visits from the experienced underwriting team to every property at valuation stage and completions from initial enquiry as fast as any in the industry.