We are all familiar with the worrying
personal insolvency statistics that get press headlines -
and of course the reported activities of 'debt counsellors'
who take large fees and create more misery for those with
personal
debt problems.
There was a significant rise of some 45%
in personal insolvencies in 2006 and it is thought that a
worsening
situation can
be expected in 2007 as credit card pressure and rising
interest rates start to bite.
In contrast, failures in the business
market were running lower again last year, as they have been
for the past 3 years
and since they peaked in mid 2002. But this is the area where
we have identified some worrying trends.
The smaller business
sector seems to be coming under increasingly difficult financial
pressures and there are a number of contributory
factors -
- disposable income is becoming eroded by
inflationary pressures not recognised in official statistics
- 3 interest rate rises has put pressure
on mortgage and unsecured lending - Interbank Rates
suggest they will move to
5.5% relatively quickly
- retail margins are getting slimmer - pressure
from major retailers and supermarkets, who are increasing
their
non food dominance
- the increasing presence of China
and India in world trade, contributing to the decline
of the UK’s
manufacturing capability
- the growth of internet sales
There will be more - but
that is enough to spell out the worrying times ahead for
a business market without much room to manoeuvre and which
historically has not always been known to seek professional
advice, other than to be more tax efficient. The market has
had a tendency to be fairly fully borrowed.
Regrettably, without
professional advice, a shortage of cash for working capital
often makes proprietors throw in the
sponge and walk away from a business that often would have
been viable with appropriate support. Our experience shows
that,
- 70% of companies do not confirm
their credit terms in writing
- the late issue of an invoice after
delivery of good is a feature of SME’s - 60% admit
they send an invoice up to 3 weeks after delivery
- 77% of SME’s say that DSO’s
are getting longer
- 69% believe that they will lose a major
customer if they insist in prompt payment
- 59% of small and medium size businesses
say they are having problems collecting debts
- there is something like £16
Billion outstanding, and over 30 days, and owing to SMEs
Clearly there is a
gap that P&A Receivables can fill
and which will add value to the relationships that accountants
and business advisers have with their clients. As well
as providing traditional 'no collection, no fee' debt
collection service for the smaller client, we also offer
a full range of credit management support, including,
- a wide
range of collection options
for companies with larger sales ledgers, with outsourced/co-sourced/disclosed/non
disclosed
options
- European and worldwide collections made
by on-site multi-lingual foreign nationals,
- an on-site legal practice that provides
a seamless service when it is necessary to resort to
litigation
- training in all aspects of credit management
from telephone techniques to credit appraisals
- consultancy on processes and systems
- the investigation of fraud
- a brokerage service to source new and alternative
forms of finance
- the recovery of assets subject to lease
or hire purchase
Whilst
unlocking the value in the sales ledger might not always
provide the ultimate solution for the company with
emerging problems, there will be times when it gives the
business an injection of funds and takes day-to-day pressure
off the busy owner. The cost of using our debt collection
service can be cheaper than using the more traditional
sources of working capital finance.
If you have clients that
you think may benefit from our services please speak Jeremy
Priestley on 0114 275 5033.
There
is more information about our services at www.pandareceivables.com
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