Do your retail clients make you wait for your payments?

Tesco are currently classed as the worst for late payment in a list of the UK’s best-known retailers, taking an average of 105 days beyond terms to pay its suppliers, according to our latest analysis.

Our data analysis also reveals that the average time taken to pay a supplier amongst the list of 20 retailers was 45 days beyond terms. Previous research shows that the average overdue invoice to a small business was worth £6,142, small business suppliers to some UK retailers could be waiting prohibitively long to receive late payments on a considerable amount of money.

martinMartin Campbell, managing director of Ormsby Street know that, whether it’s a small greetings card designer or a food manufacturer of some sort, winning a contract to supply a national retailer can be a landmark moment for a small business, particularly in the lucrative Christmas shopping season, but just because a retailer is a household name, it’s no guarantee they are going to pay on time.

He says, ‘Because Christmas is such a major part of the shopping calendar, any orders may be much larger than at other times of the year. This means that a small business could be waiting for even more money during the festive period. If they have had to take on extra staff or resources to meet the order to a major retailer, this could be a potentially difficult and damaging time for their cash-flow.’

The best retailer in the list when it comes to paying suppliers, is high-end department store, Fortnum & Mason, which takes an average of just five days beyond terms to pay its suppliers. In second place was Lidl, which takes an average of nine days beyond terms, followed by House of Fraser and John Lewis, who pay on average after 15 and 18 days beyond terms respectively.

Campbell adds, ‘Negotiating with a major retailer on things like payment upfront can be tough – retailers are all aware that for a small business it’s a big deal to get their products in front of a national audience and so they usually hold the trump card.

‘But that’s not to say that small businesses should just accept the situation. If the retailer values the product and wants it in their store, there should always be a little leeway for negotiating better payment terms.’

The analysis showed that amongst 20 of the UK’s leading retailers, seven of those took on average more than 60 days beyond terms to pay their suppliers, a period of time that is hard to justify.

Campbell concludes, ‘For a small manufacturer or supplier, winning a national retail contract can feel a little like Christmas has come early.

‘Yet if it means they have to wait more than two months to receive payment, it is a big decision as to how any shortfall in cash-flow can be bridged, if indeed it can. The answer lies in small businesses protecting themselves against late payments by learning more about the financial health of their customers, negotiating more favourable payment terms and then chasing hard for late payments.’

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Notes: The data used in the analysis was provided by Experian, the global credit reference agency, and looks at the credit rating and payment performance looking at 20 of the UK’s leading retailers. This data is available to users of their services.

The payment performance information generated is gathered from a network of six thousand suppliers over a period of three months (up to and including 31 October). Experian provides further information on payment performance data on its FAQ pages.

Ormsby Street chosen as a ‘Credit Today Awards’ finalist – best use of technology!

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We’re thrilled to announce that we have been picked as a finalist for the Credit Today Awards – in the ‘best use of technology/credit decision making’ category!

Now in their 16th year, the Credit Today Awards celebrates success and innovation of numerous companies working within the credit sector, with this year’s finalists ranging from startups, such as ourselves and student loan company, Smart-Pig.com; to traditional banking institutions such as Lloyds bank and RBS.

Ormsby Street is the software-as-a-service company behind CreditHQ, which uses data from seven million company records to check credit status and general financial health, and uses a traffic light system to advise small businesses whether a company is likely to pay them on time. It also provides regular updates on credit ratings, so a small business will be kept abreast of any changes in a customer’s ability to pay.

To see how your business appears to others, and to check for FREE how your trading partners are doing, register on www.credithq.co.uk to get started!

 

 

Late payments force small business directors to take pay cuts

Today’s report in The Times, outlines the increased importance of checking out the financial health of the companies you’re trading with: http://www.thetimes.co.uk/tto/business/workinglife/article4354941.ece

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The latest figures from this story, report that the average UK small business is now owed £32,000, resulting in around £677 per month for each company affected – this adds up to over £8.7 billion in late payment costs for the whole of the UK – forcing one in five directors of these companies to be taking salary cuts.

So, if you run a small business – what can you do to ensure that you don’t become one of these statistics? Check, Monitor and Collect…

Check: KNOW who you’re trading with. By registering with CreditHQ, you can check who your suppliers, customers and competitors are for FREE! The simple ‘traffic-light’ payment and credit indicators quickly show you who has a solid credit rating, and who pays their invoices on time- if both of these indicators are red, it might be worth your while having a look for more secure businesses to deal with. If you do want to find out more detailed information about a company, you can upgrade to the Standard subscription to obtain details of net worth, assets, liabilities, sales, and details of adverse credit events.

Monitor: Keep a watchful eye on those you’re doing business with. Add businesses to the Watch List on CreditHQ and receive alerts when that company’s details change – if they’re beginning to struggle financially, make sure you’re the first to know rather than finding out when they get into deep water.

Collect: Chase your invoices before they become due. If a business you’re monitoring is beginning to experience problems, think about re-negotiating your payment terms with them, or reducing the amount of credit you offer to them the next time you trade with them.

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Checking out your trading partners need only take a few minutes, but could save you months of chasing payments and juggling cash-flow, simply because you went into business with someone you hadn’t researched. Plus, it’s free to do and could potentially save you from a pay cut later in the year! www.credithq.co.uk

 

 

 

6 ways to avoid bad debt on Debt Collection Awards day!

It’s the “Debt Collection Awards” today – who knew there was an awards ceremony for that?

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To maintain a healthy business and avoid bad debt, not only do you need to get paid for the goods or services you provide, but you also need to get paid on time. So, to reduce the risk of having to call the debt collectors, here are some tips:

1) Check your customers’ creditworthiness – you can use CreditHQ (it’s free), to search for the companies you trade with and find their credit worthiness. The lower the credit indicator, the greater the risk of a company facing financial difficulties.

2) Set credit limits – often smaller and younger companies will have a lower score, which doesn’t necessary mean they won’t pay, but you can consider setting a lower credit limit until you are confident that they can and will pay on time.

3) Know when you should get paid – manage your cash flow by forecasting when invoices are due and keeping an eye on any changes in payment patterns and delays with your existing customers.  For new customers who you are yet to trade with, check when they are likely to pay you. Search for the company on CreditHQ and look at the payment indicator – the lower the number, the greater the risk of a company paying their bills late.

4) Monitor the companies that you are trading with – you can set up an account on CreditHQ (did I mention, it’s free!), and create a ‘Watch list’; you’ll then get alerts when credit or payment indictors change for the companies that you are watching, so you’ll know if who you might need to chase for payments.

5) Give clear terms – make your terms visible to your customers by publishing them on your website, on your invoices and send a copy to your customers upfront. Include a clause stating that you continue to own the goods or services until they have been paid for.  You could offer discounts for payments made within 30 days, and charge interest on anything over (you’re legally entitled to), but if you chose to do this, make sure your terms specify this.

6) Manage your invoicing processes:

  • Send invoices on time.
  • Make sure you find out the right person or department to send the invoice to, and request an acknowledgement that it has been received.
  • Keep up to date records on who owes you what and when.
  • When an invoice is due, chase it.
  • Stop supplying customers who don’t pay on time.
  • Resolve any disputes quickly – payments are usually withheld until the customer is satisfied.
  • If you have customers who regularly pay late, increase the prices that you charge them, or cancel any credit facilities.

If you don’t get paid, even after chasing, then here’s what to do next..

Before you go down the debt collection path, try one last time to recover the debt yourself, phone and write to the customer and let them know that this is your next course of action, as this may be enough to get them to pay. Also try and find out why they haven’t paid, as it may be a problem with their accounts system, or they may be having problems, and you could agree a repayment schedule.

Decide if the amount is worth pursuing – it may not be worth your time or the cost to collect, so let it go and move on.

4105722502_a442444bb9_mIf you do decide to pursue the debt, then use a debt collection agency, or take legal action using a solicitor or via the small claims court (https://www.gov.uk/make-court-claim-for-money/overview). A reputable debt collection agency can chase late payments in a professional manner, without alienating the customer.

Make sure you check the costs – there may be a flat fee or a percentage of the debt recovered, or both, and ask about additional charges.

Don’t delay chasing any bad debt and good luck. Please do remember to reduce your risk though, by knowing your customers better – use CreditHQ to check them out!

If you on the other end of the debt collection process, and are being pursued by debt collectors, then here is advice on how to deal with it: http://www.money.co.uk/article/1009025-how-to-deal-with-debt-collectors.htm

Ormsby Street launches latest version of CreditHQ

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Ormsby Street, a Software-as-a-Service business providing financial data services for SMEs, has launched its new product, CreditHQ. The new offering, which was developed from the company’s work with 18,000 SMEs through Barclays bank, enables small businesses to check their customers’ and suppliers’ financial stability, and monitor their credit and payment performance.

Working with major credit data supplier Dun & Bradstreet, CreditHQ offers two different packages to choose from. Every customer gains free access to over seven million company records, all explained in a comprehensible way: the higher the number, the more favourable the company’s finances.

CreditHQ also offers details such as the company number, trading and registered addresses, whilst the simple credit and payment indicators allow users to easily understand the financial risks of working with individual companies, and provide an initial insight into their financial stability. Users are able to search for specific companies either through their registered name or company number.

The subscription package, costing £25 per month, provides users with more detailed credit and payment indicators. This includes up-to-date financial information such as net worth, assets, liabilities, sales, and details of adverse credit events for every trading partner. Small businesses are provided with invaluable financial information that gives insight into their real cash-flow position and awareness of potential upcoming problems for businesses that they deal with. The package also delivers regular alerts informing customers of financial changes.

CreditHQ can be accessed from anywhere – desktop, laptop, tablet or mobile, via a fully responsive website.

On the launch, Martin Campbell, Managing Director at Ormsby Street, commented:

“One of the major problems small business owners cite when questioned about running their own business is ‘cash-flow’ and knowing who they should be doing business with.

”In the UK, a huge number of SMEs are plagued by bad debt when partners fail to pay invoices within the agreed period, with 38% of small businesses having experienced cash-flow problems often threatening to put them out of business. This lack of funds in a business can be responsible for stunted growth and slow company development. CreditHQ aims to make this a thing of the past, offering free, easy advice, allowing companies to the ability  to understand the financial patterns of trading partners, ensuring adequate funds are always available.”

www.ormsbystreet.com
www.credithq.co.uk

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About Ormsby Street

CreditHQ is built by Ormsby Street, a Software-as-a-Service business based in Old Street, London. Formed in 2014 to take over the operation of the financial data proposition of BCSG, Ormsby Street are developing the next generation of financial data services for small businesses. Their team of high-performing product innovators and software engineers are quietly taking sophisticated financial information and turning it into a next-generation digital tool to help businesses make good decisions about customers, suppliers and themselves.

Your rights with overdue invoices

You’ve worked hard to win a new customer. You’ve worked hard to deliver a quality product/service for the customer. But now the customer is making you work hard to get your invoice paid. That can’t be right, can it? It isn’t right, but there’s nothing you can do about it is there? Wrong. There is! You have rights and you shouldn’t be afraid to exercise them in order to get paid. You’re (probably) not running a charity. You have bills to pay and employees who have families to support; so getting your money is really important. And the government know this so they’ve put in place mechanisms in order to support you in getting paid.

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Payment terms It’s always best to have your own payment terms laid out because these will more accurately reflect the needs of your business and you can set these to be whatever you need. 7 days, 30 days, or 100 days. It’s up to you. However, if you haven’t explicitly given terms to your customer then the default is 30 days and it’s within 30 days that they have to pay you.

Charging interest Once the invoice becomes overdue then you are perfectly entitled to charge interest on the amount owing. This would be either your own rate of interest if you’ve included it within your terms, or it could be the statutory rate of interest, which is 8% PLUS the Bank of England base rate for business to business transactions. Don’t be afraid to do this, because it’s your money that they’re stopping you accessing. You could be gaining interest on that yourself if it was in the bank, or you could be investing it in obtaining further work, and you can’t until they pay you.

Statutory demands If all else fails, anyone who is owed money can make a statutory demand and you don’t need a solicitor to help you. Once the demand is received by the company owing the money, they have 21 days to either pay the debt or reach a payment agreement with you. If this isn’t forthcoming then you can start a winding up order against the company. But hopefully all our customers will pay on time and we don’t need to worry about any of this!

Don’t plan anything, other than plan to change

Our approach to product development here at Ormsby Street follows an approach that means we only plan so far in advance, which is typically only a period of 2-4 weeks. We have a strategy that means we know where we generally want to be in 6, 12, 18 months, and this is the overall goal, but we don’t sit down and think “In 5 months time we need to do X activity in order to meet Y goal”.

Why do we do this? Simply it’s because we can’t predict the future. Don’t tell the psychics I said this, but no-one can (although if they were really psychic they would have known I was going to say that!).

We don’t know what our customers will think is important to them in the long term, but we do know what’s important for them now, so we do these things now and anything that isn’t delivering against these immediate needs gets put down the list. Our entire work schedule works around this premise, and we’re set up to change direction every couple of weeks depending on what is important.

What does this mean in the context of managing your cash-flow?PlanA

Deal with the things that make a difference now, not the things which you think might be important a few months from now.
For most small businesses, the largest concern is the flow of cash in and out of the business. This probably trumps any need for a website, or hiring an administrator, or getting that new high powered bit of equipment. As such, focusing on the factors that affect this the most can make a huge difference to your financial security.

Getting your invoices raised when you do the work, is a key immediate activity because the sooner you raise them, the sooner you’ll get paid, especially if they’re for large amounts, or if you need to incur expenditure in order to deliver the goods or service.
After this, following up your invoices for payment as soon as they become due, will also mean you’ll get your cash sooner. You should start with those invoices that are the biggest or are with customers you know will pay soonest, as this will mean there will be cash available whilst you chase the awkward customer or the small amounts.

But be prepared to change what you need to do because of the immediate needs.

If you recognise that a customer is having financial difficulties, then get in there quick and get your invoice paid so you’re not left high and dry. if the worst happens -they stop trading. If a customer says they can’t pay the invoice until they get paid by someone else, negotiate with them to see what they can pay now, so that you have something in the bank. Or even bring in the option for up front payment so you can make sure you get your money before you incur any costs.

The aim is to get paid promptly for all your work, but when situations change, be prepared to adapt for what’s important now.