Posts Tagged ‘insolvency



22
May
15

SMEs face barriers to growth

46 per cent of SME owners believe that a lack of access to skilled workers is the main obstacle to growing their business. The figure comes from research conducted by the British Insurance Brokers’ Association (BIBA) and Populus in which 500 directors, senior leaders and SME owners were polled.

A similar number (43 per cent) believe that cutting so-called ‘red tape’ would be the quickest way to stimulate growth among mid-market businesses.

For smaller companies – those with 10-49 employees – access to credit is a wide concern, with 26 per cent citing this as the biggest barrier to expansion.

According to the BIBA and Populus survey, the biggest barriers to growth are:

  • Lack of talent/skills: 46 per cent
  • Red tape: 43 per cent
  • Rising supplier costs: 36 per cent
  • Lack of tax breaks for small business: 24 per cent
  • Lack of business opportunities/sufficient network: 23 per cent
  • Availability of credit: 23 per cent
  • Knowledge of overseas markets: 13 per cent
  • Protective overseas markets: 11 per cent
  • Lack of cost-effective transport: 10 per cent

One of the biggest obstacles to growth is a lack of effectively skilled staff, so more needs to be done to encourage SMEs to take on apprentices.

Interestingly, availability of credit is seen as a barrier for nearly a quarter of those polled. Clearly, banks need to review their lending policies.

Hart Shaw is experienced at assisting SMEs and can offer a range of services to help owners facing any of the problems highlighted in the survey. For more details, please Christopher Brown, Business Recovery & Insolvency Partner on T: 0114 251 8850 or email: chris.brown@hartshaw.co.uk.  

 

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26
Mar
15

The TTIP of the iceberg

The future of the UK’s SMEs could be threatened if the Transatlantic Trade and Investment Partnership (TTIP) is introduced.

TTIP would bring benefits to big business, but SMEs seem set to lose out. A huge majority of UK firms are SMEs and they have been behind the economy’s growth for a long time. At the last Autumn Statement, the Government recognised this and rewarded them with a raft of measures designed to help. Now, their very existence could be hanging in the balance.

The aim of TTIP is to create a free market on both sides of the Atlantic and remove regulations, but a good many of these currently work in favour of SMEs. The European Commission’s Centre for Economic Policy Research has said that the agreement will boost EU economic output by 0.5 per cent by 2027. Export predictions are slightly more positive and put growth at 5–10 per cent over a 10–20 year period. However, given the current rapid rate of growth among SMEs, it’s hard to see why such a potentially disruptive move is a necessary intervention.

If you’re a small business in Europe that creates products adhering to EU rules, you may well find that under TTIP, your products are more expensive to produce than their US equivalents, due to their use of cheaper labour and materials that are not permitted under EU legislation. If some of the EU’s regulations are scrapped, a lot of US products that were previously banned are likely to flood the market and undercut prices.

A further problem for SMEs is the damage that TTIP could cause to local and home-grown businesses. In the UK, some councils operate schemes that aim to strengthen communities and help small local suppliers. In fact, the government recently pledged support to smaller businesses by setting a target for 25 per cent of its supplier contracts to be fulfilled by SMEs by May 2015. However, these arrangements would be deemed illegal under TTIP; further compromising the growth prospects of the UK’s SMEs.

For further details please contact Christopher Brown, Business Recovery & Insolvency Partner on 0114 251 8850 or chris.brown@hartshaw.co.uk.

 

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03
Mar
15

No business is immune from failure

The recent insolvency of the Rotherham based MTL Group is a timely reminder that no company, however large and high profile, is immune from failure. Administrators were appointed to MTL Group on 2 February 2015 with the immediate loss of 157 jobs and leaving creditors owed circa £10m.

The immediate effect of any insolvency is that creditors suddenly have a bad debt to deal with, and the larger the debt, the more likely that there will be a domino effect, causing otherwise solvent companies to have cash flow problems which could ultimately lead to failure. When the initial insolvency involves such a high profile company as MTL Group the risk of the domino effect only increases.

We are currently helping one of the creditors of MTL who has a large bad debt. Fortunately this company is financially sound but even so, the disruption to its immediate cash flow caused by MTL is such that we are currently negotiating with HM Revenue & Customs a time to pay arrangement for the current VAT Quarter. This will enable the Company to avoid penalties and make nominal payments until, over the next six months, it can claim VAT Bad Debt relief on the MTL debt and so satisfy the current VAT quarter.

Other Companies in less financial health may need to negotiate with their creditors generally and this is where an Insolvency Practitioner can provide valuable help. Of course this is dealing with the effects of a bad debt after it has happened. But what practical things can a Company do to lessen the effects of a bad debt before it happens?

The first thing is to know your customer, assess their credit worthiness and set a credit limit which reflects the commercial risk you are prepared to take, because were your customer to fail that is how much you stand to lose.  Once set, stick to it. We often see cases where although a credit limit was in place, the company has ignored it and gone on supplying the customer which has ultimately failed. If possible incorporate a personal guarantee into your credit application form, it may not always be possible, especially with larger customers, but it is worth trying. Finally consider credit insurance to protect against non-payment should a customer fail. The benefits of credit insurance are not only that the debt being insured would be paid, but that you will have access to improved credit intelligence on your customers.

If your require any assistance in dealing with your creditors or require further information about credit insurance please contact Christopher Brown, Business Recovery & Insolvency Partner at Hart Shaw on T: 0114 251 8850 or email: chris.brown@hartshaw.co.uk.

Christopher Brown of Hart Shaw

Christopher Brown, Business Recovery & Insolvency Partner at Hart Shaw

 

 

 

 

 

 

 

 

 

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27
Feb
15

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: chris.brown@hartshaw.co.uk.

Christopher Brown of Hart Shaw

Christopher Brown, Business Recovery & Insolvency Partner at Hart Shaw

 

 

 

 

 

 

 

 

 

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09
Dec
13

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: chris.brown@hartshaw.co.uk.

 

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26
Nov
13

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: chris.brown@hartshaw.co.uk.

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18
Nov
13

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: emma.legdon@hartshaw.co.uk.

 

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