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Have you checked for fraud and error?

Businesses are being advised to check their accounts regularly to identify errors and fraudulent acts that could potentially harm their business.

It comes after a new report produced by the Centre for Counter Fraud Studies at the University of Portsmouth uncovered an increase in the amount of fraud and error found within UK businesses and the public sector during the last year.

Their research revealed that these mistakes cost organisations more than £98.6 billion a year in turnover. It also discovered that losses from these activities as a percentage of annual expenditure increased by 18 per cent from 2010/11 to 2012/13.

The report’s figures are based upon valid loss measurement exercises, which estimate fraud in an organisation by checking one type of its expenditure for fraud and extrapolating it across the other areas of the business.

Fraudulent actions and errors can easily be missed within a busy business, but failing to spot them and rectify the problem could soon eat into profits and turnover.

This report highlights what a significant issue this is in the UK and with many small and medium-sized enterprises already facing issues with late payments; this is the last thing they need.

However, by ensuring you have a robust set of accounts and a monitoring system in place you can identify problems and deal with them quickly.

Many firms need to create a culture that makes reporting fraud and errors in the workplace second nature. Tougher internal guidelines should also be put in place to reduce complacency and prevent mistakes from happening in the future.

For further details please contact Christopher Brown, Business Recovery & Insolvency Partner on T: 0114 251 8850 or email:

Christopher Brown of Hart Shaw

Christopher Brown, Business Recovery & Insolvency Partner at Hart Shaw










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Hart Shaw Business Recovery & Insolvency wine tasting event

Accountants, solicitors, business finance providers and business coaches in the East Midlands area are being invited to join Hart Shaw’s Business Recovery & Insolvency department for an evening of fine wine tasting at Mansfield Manor Hotel on July 16th.

The aim of the evening is to develop and foster relationships between Hart Shaw and its current referrers and potential referrers that may know of businesses which require recovery & insolvency advice and/or complex tax work.

Hart Shaw, which is based in Sheffield, often works with other accountants to find the best solutions for their clients as Brendan Hall from Hart Shaw explains: “When working with other business professionals that don’t have our expertise in recovery and insolvency, our aim is always to try and turn their client’s business around and keep it trading. The wine tasting event is an opportunity for us to say thank you to existing referrers and to meet new people that we may be able to work with in future. Those attending will get the chance to meet our Insolvency Practitioners and Tax Specialists, network with other professionals from neighbouring areas and learn more about the specialist services we can offer – which can often be the difference in a referrer losing or keeping a client.”

Mansfield Manor Hotel is located in Carr Bank Park in Mansfield.

The evening starts with a 6.30pm registration and networking followed by the wine tasting session which will be hosted by specialist wine importer Emilios Polimos, owner of Emilios Greek Restaurant and a wine importer with Pegasus Wines

To book a place for the free to attend event, please contact Sarah Anyan on 07876 765592 or email


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Failure to plan hits small businesses’ profits

Small and medium-sized businesses are being advised that failure to have a business plan in place could hit their profits – a warning that is backed up by new research.

According to the study, which surveyed 453 SMEs, 70 per cent of those with a business plan in place made a profit, compared to 52 per cent without a plan.

Of those polled, a third had not put a plan in place for the year, with two thirds of these saying they did not see the need for a plan.

Christopher Brown, Business Recovery & Insolvency Partner at Hart Shaw Chartered Accountants, said: “There is a saying that failing to plan is the same as planning to fail – and that is certainly true of a lot of small and medium-sized businesses today.

“While many business owners may not see the need for a plan, the fact is that those who do have a plan will see greater benefits in the long term, including increased profits.

“If your business is not where you want it to be then it may be time to review your business plan and if you have not got one in place then now is the time to take that step. Your local accountant can help you identify your business goals and then draw up a plan which can be reviewed on a regular basis as your circumstances change.”

For further information, please contact Christopher on T: 0114 251 8850 or email:

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Increase in Insolvencies as economy improves

As the economy finally appears to be moving to a state of recovery there are still concerns for a large number of SMEs who are teetering on the edge of survival. Increased business confidence should enable these businesses to take advantage of an upturn in their markets, offering them the opportunities for the growth they have been crying out for. But for some businesses who have been struggling for the last few years it may not be that simple.

The term ‘zombie’ businesses has been circulating for some time now, referring to businesses that are managing to survive by barely servicing their debts, taking advantage of low interest rates and the patience of their creditors. Whilst there may be growth opportunities there for these businesses, poor cash flow and a lack of working capital may restrain their ability to fulfil orders as the markets improve.

Historically, the number of insolvencies has tended to increase as the economy improves, interest rates rise and creditors start to apply pressure. These ‘zombies’ are most at risk of failure and will have a knock on effect to other businesses in the supply chain if they become insolvent.

So what can you do to protect your business should one of your customers turn out to be a ‘zombie’ and fails? You can never know your customer well enough. Credit checking your customers on a regular basis can mean the difference between getting paid or being left with a bad debt. If you have carried out a credit check and set a credit limit, stick to it. We often see creditors in the liquidations we deal with who are owed many times the credit limit they had set. Review your terms and conditions to ensure that you are trading on your terms and not your customers. Consider incorporating a Retention of Title clause in your terms and conditions to give you the opportunity to recover your goods should your customer not pay. Of course, on paper this sounds simple but in practice it takes some effort to get it right, keep doing it right.

If your business is ‘zombie’ it is never too late to take professional advice to start the process of turning the business round. Of course, the sooner you take advice, the better as there will be more options available to you.  Engaging an Insolvency Practitioner or Business Recovery professional is not a negative move, as first and foremost, if there is a viable business to be saved a good Practitioner will explore every avenue to ensure the business continues to trade, looking for the best possible outcome for all involved.

For further information please contact Christopher Brown, Business Recovery & Insolvency Partner at Hart Shaw on T: 0114 251 8850 or email:


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Consultation to be launched into late payments

Small businesses who struggle to get paid on time should be aware that the Government is to launch a consultation into the issue.

According to YouGov research, 85 per cent of small firms had experienced late payments over the last two years, despite the Government-backed Prompt Payment Code, which was established in 2008 to help small suppliers get paid on time.

Although around 1,500 firms are signed up to this scheme, it has been claimed that some have still managed to stretch out settlement periods to 120 days, despite an EU directive which says business-to-business payments must be made within half that time.

Now, Prime Minister David Cameron has pledged to launch a consultation into late payments, asking for views on areas such as encouraging greater responsibility for prompt payment, highlighting firms who are good payers and those who are not, how existing legislation can be better enforced and whether firms should be fined for making late payments.

Late payments can have a crippling impact on the cash flow of many smaller businesses, so it will come as welcome news to many that the Government is now looking into the matter.

The consultation is due to be launched later this year and it remains to be seen what the outcome will be. However, in the meantime, businesses who are experiencing cash flow difficulties or struggling to budget effectively may benefit from seeking expert advice as soon as possible to ensure that any problems are identified and addressed before they get out of hand.

For further information, please contact Christopher Brown, Business Recovery & Insolvency Partner on T: 0114 251 8850 or email:

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2014: From Rescue to Recovery

As the end of 2013 is fast approaching we can look back and see that it has again been an uncertain year in the insolvency profession.  The last couple of years has seen the number of insolvency appointments falling, as indicated by statistics released recently by R3, putting the number of companies going into Administration during the first nine months of 2013 at 16% less than in the same period last year.  All of which supports the Treasury’s comment in the summer that the UK is “moving from rescue to recovery”.

One outcome of this recession is the existence of “zombie businesses”.  These businesses have managed to survive whilst making losses because of low interest rates and the patience of their creditors. In some instances this they are only just able to service their debts on a month by month basis.

It has recently been reported in the Financial Times that the estimated number of zombie businesses is currently 432,000, which is a year on year increase since 2010. Of this number many will be able to take advantage of the opportunities of the signs of growth that are being reported, but unfortunately the weakest of the zombie businesses who are already struggling with their cash flow won’t have the working capital requirements to be able to fulfil orders as the markets improve.  It is these businesses that will have to take advice from insolvency professionals.

In previous recessions the number of insolvencies has always increased in the early stages of recovery for these reasons and 2014 may see this trend continue with higher insolvencies than seen in 2013, with the surviving businesses finding new opportunities as their competitors reduce.

If your business is in need of recovery advice please contact Emma Legdon, Business Recovery & Insolvency Partner at Hart Shaw on T: 0114 251 8850 or email:


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Retention of Title

When two parties enter into a contract of sale for goods, there will come a point in time when the legal title to those good transfers from the seller to the buyer. The basic rule under English Law is that, unless the parties to the contract agree otherwise, title will pass, at the latest, at the point of delivery.

If the buyer becomes insolvent just after delivery and the goods are still there, the seller won’t be allowed to recover their goods, as they are no longer its property. This can obviously be very frustrating for the seller. In response to this, in the late 1970’s the Retention of Title Clause evolved.

Quite simply, a Retention of Title Clause is a clause in the contract of sale which allows the seller to retain the legal title or ownership of the goods being sold until the happening of a future event, usually the receipt of payment by the seller.

There are three stages to a successful Retention of Title claim: firstly, there must be a valid Retention of Title Clause. Secondly, the clause must be incorporated into the contract of sale. Finally, the seller must be able to identify its goods.

There the two general types of clause – a Simple Clause and an All Monies Clause.


Simple clause

A Simple Clause could be as follows:-

“Title to the goods remains vested in the seller and will not pass to the buyer until the purchase price for the goods has been paid in full and received by the seller.”

What this means in practice is that a seller wanting to take back its goods must identify specific goods to a specific unpaid invoice. Depending on how the supplier operates its business that might be difficult. If the seller supplies on a regular basis, how does it prove to a liquidator that the items of stock remaining are from an unpaid invoice rather than from an earlier one that has been paid? This can be difficult.


All monies clause

In response to this, the All Monies Clause evolved. Such a clause could be as follows:-

“Title to the goods remains vested in the seller and shall not pass to the buyer until:

(a)  the purchase price for the goods has been paid in full and received by the seller, and

(b)  all outstanding amounts due from the buyer to the seller have been paid in full and received by the seller.”

What this means is that title only passes from the seller to the buyer when all monies owed by the buyer have been paid, irrespective of whether specific goods have been paid for.  If the seller trades regularly with a customer on credit, the account between them may never reduce to nil in which case title will never pass. In recovering its goods the seller would only need to prove that it supplied them.


To be effective, a Retention of Title Clause has to be agreed to by both the seller and the buyer – and it has to be incorporated into the contract of sale.

Often, a supplier might only print the clause on the back of their invoices or delivery notes. That on its own may not good enough since an invoice or delivery note is a post contractual document. The clause needs to be in the contract of sale before the sale is agreed.

In certain circumstances it can be possible for a seller, who only has the clause printed on an invoice or delivery note, to argue that there has been a sufficient course of trade between the seller and buyer for the clause to have been incorporated. From a seller’s point of view, this is an argument of last resort, but it can sometimes work. However, if a seller is going to the trouble of printing a clause on their invoices, why not  do things properly and ensure its incorporated into the contract at the start?


Incorporating the clause

One way to incorporate the clause is to have a credit application procedure. Before buying on credit the buyer fills in and signs a credit application form which includes the Retention of Title Clause.

Another way would be to require the buyer, when ordering, to use the sellers purchase order form which incorporates the Retention of Title Clause. This could either be a paper form or an online form.


Identifying goods

Whichever type of clause a seller is relying on, it will need to be able to identify the goods it has supplied if it hopes to recover them under Retention of Title. Can the seller take steps to improve the identification of its goods – use of serial numbers or distinctive packaging?

On a practical point, as soon as a seller hears that its customer is in trouble, that a liquidator or administrator has been appointed, or is going to be appointed, it needs to go to its customer’s premises as quickly as possible to identify its goods. It should take an inventory and have someone in authority sign to confirm what was there. The seller should then make its claim and keep the pressure on until it has been dealt with.


How ROT Claims Can Fail

So what things in practice can mean a Retention of Title claim does not succeed?

Even if a seller has a validly worded clause incorporated into a credit application form signed by the buyer, the claim may still fail due to lack of incorporation. The problem can be if something has changed since the forms were originally signed. Other paperwork may have been used, or agreements made between the seller and buyer after the credit application form was signed which means that the clause is no longer incorporated. For example, if the buyer orders goods using its own purchase order form which includes its terms, one of which may be that title passes on delivery, then the original Retention of Title Clause will no longer be incorporated.

Other reasons for the failure of an ROT are to do with the goods themselves.

  • The seller may fail to identify its goods to the satisfaction of a Liquidator or Administrator. This may be due to the goods being mixed with goods supplied by other suppliers or simply because the packaging, which would have identified it as the sellers, has been removed.
  • The goods may have been sold on and are no longer there. However, if buyer also uses Retention of Title and has not been paid it may be possible for the seller to recover its goods direct from the buyers customer.
  • If the goods supplied have changed their form, the claim will probably fail. For example, if sheet steel has been supplied, as soon as it has been worked on –  cut, drilled or bent, value will have been added by the buyer and the goods supplied are no longer the same.
  • If the goods have been incorporated into a product it may not be possible to recover them without causing damage to the product, in which case the claim will fail.


In conclusion, if the type of goods you supply are suitable, then having a Retention of Title Clause is something you should consider. But if you are going to have one, do it right and review your systems to ensure it works when you need it.

For further information please contact Christopher Brown, Business Recovery & Insolvency Partner at Hart Shaw on T: 0114 251 8850 or email:


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A new networking group for local businesses

Hart Shaw Chartered Accountants and Reynolds Trade Credit are setting up a new breakfast club aimed at bringing together decision makers from local businesses in the Sheffield City Region.

Hart Shaw BRI Reynolds Trade Credit





The format of the events will be open networking followed by a short discussion on relevant business issues.

The first event is taking place at the Aston Hotel on the Sheffield / Rotherham border on Wednesday 9th October between 8:00am and 9:15am, and will focus on Retention of Title clauses.

Future topics can be decided by the group’s members and opportunities to sponsor and have presentation slots will be made available.

The aim of the group is for like-minded decision makers to share their experiences and discuss solutions to everyday business issues.

Full details are:

  • Date:      Wednesday 9th October 2013
  • Time:      8:00am for breakfast sandwiches and open networking, followed by a brief presentation until 9:15am
  • Venue:   Aston Hotel, Britannia Way, Rotherham, S60 5BD

The breakfast club is FREE to attend and you are very welcome to bring a guest or a colleague.

To confirm your attendance please contact Brendan Hall at Hart Shaw on T: 0114 251 8872 or email:

Places are limited so please book early to avoid disappointment.

We look forward to seeing you there.

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The Company Voluntary Arrangement

Although liquidating and buying back the assets can be a simple way of dealing with an insolvent company, it is not always the best solution for the directors or shareholders.

A recent case involving a company with assets worth £20,000 on liquidation and liabilities of £180,000 (with £92,000 owed to the bank) indicated that liquidating and buying back the assets would seem the obvious solution. However, doing so would have serious consequences for the directors who had given personal guarantees to the bank. The directors, who were in their mid to late 50s, had no funds to either settle their guarantees or buy back the assets and so faced losing their houses and well as their income were the company to fail.

Having discussed the options available, a Company Voluntary Arrangement (CVA) was the preferred solution to enable the company to continue trading and service the banks debt which was secured by a debenture. However, for a CVA to work the company has to be profitable and be able to make income payments. Working with the company’s accountant, a plan was put in place to rationalise the business and return it to profitability.

Support of the bank was vital so an outline of the CVA proposal was put forward. The bank indicated their support and so the CVA proposal was developed further. As the proposal was being finalised the directors were advised to speak to the main trade creditors. Although these meetings were uncomfortable for the directors, the creditors involved appreciated the fact that the directors had taken the trouble to see them and this helped gain their support.  At the formal meeting of creditors the CVA was approved by all the creditors who voted.

The CVA was structured so the company would pay income payments for a period of five years based on what it could afford to pay, having taking into account the servicing of the bank debt.

In fact during this five year period the company’s loans and overdraft will be repaid in full so that at the end the company will be debt free and the directors will have time to generate funds for their retirement.

There are options available for an insolvent company however it is only by talking to the directors and gaining an understanding of the business that a solution which is in the best interest of all stakeholders can be achieved. By taking advice early these options can then be explored in full.

Emma Legdon, Business Recovery & Insolvency Partner

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The Adviser – Summer 2013

Welcome to the Summer 2013 edition of The Adviser, Hart Shaw’s periodic client newsletter. This newsletter aims to introduce The Adviser - Summer 2013.inddyou to the people behind the services at Hart Shaw and give you relevant points of contact for our more specialist services.

Our lead article focuses on preparing your business for sale or succession and the importance of developing a long term plan in order to maximise business value.

We would like to introduce you to our new Business Recovery Partner, Emma Legdon, who was made a partner at Hart Shaw earlier in 2013 after being with the firm for 20 years. Emma’s article on the current state of the economy shows that the recession may not be as bad as feared and that there are positive signs on the business recovery front.

We also introduce our new VAT Adviser, Carla Davis who provides a very interesting article on the history of VAT now that it is in its 40th year of taxation.

Hart Shaw’s Financial Planning department would like to inform company directors to a new tax efficient life insurance product which is now available.

We also have some important news for users of Sage 50 Accounts software.

Our guest article comes from Reynolds Trade Credit, a key business partner to Hart Shaw who discuss the credit insurance market and how this can help with risk management for businesses who are looking to grow in difficult times.

Finally, no newsletter is complete without a plug for our social media forums! If you would like to engage with Hart Shaw on a more regular basis please check out our Blog, LinkedIn, Twitter and Facebook feeds. There are some smart phone links on the front page which will direct you to these forums.

As ever, we really appreciate any feedback you can give us about this newsletter, our other communications and the services we provide so if you would like to get in touch please email us at

Click here to download The Adviser