Saturday, 2 February 2019

Paying Suppliers out of Fashion at Peacocks




News that Peacocks, has written to suppliers informing them that the company will take longer to pay its bills underscores the challenge that the governments' small business commissioner and lobbying groups such as the Federation of Small Business face in attempting to change poor payment practices in the UK. It also suggests a troubling and clever approach that large companies might start to use to avoid proper scrutiny of unfair payment terms.

In recent years, there has been a good deal of focus on inequitable and unreasonable payment terms, imposed by large companies on smaller suppliers, especially in retail and construction.  Recently a government select committee report highlighted how late payment was holding back small business growth and leading to business failures.

As a result of such scrutiny and the potential for reputational damage, grocery companies such as Morrisons, Aldi, Tesco and Waitrose reviewed their payment practices and announced faster payments, especially for small suppliers - which are now paid in 14 days by grocers.

The Prompt Payment Code (of which Peacocks is not a member, in contrast to close competitor Primark) requires signatories to pay everyone in under 60 days and to be moving towards payments within 30 days.

The discount clothing chain, which already gave itself a very generous 90 days to pay suppliers will, from now on, take up to 130 days to pay for goods. Managing Director Steve Simpson tried to put a gloss on the news. Focusing on how the company had negotiated a deal with invoice finance company, Tradewind, to get suppliers paid in only 10 days. The catch? A 'very reasonable' fee of 2.25% that the supplier pays to Tradewind to unlock their payment if they don't want to wait for 130 days.

Let's unpick this. A supplier sends some reasonably-priced fashion items to Peacocks, which in turn sells them for cash in its high street stores. Instead of getting paid in a reasonable time by its customer, the supplier must instead go to a finance company to get paid. The finance company takes 2.25% of the invoice value, so the supplier gets 97.75% of their bill paid for the privilege of not having to wait 120 days more for the money. Peacocks pay the finance house the full amount in 120 days time.

In effect the supplier has borrowed money from the finance company for 120 days and paid them interest at 2.25%, which works out to and Annual Percentage Rate (APR) of nearly 8%. If the supplier can access bank finance (eg an overdraft) more cheaply than this, then they’d be better off taking the bank loan or overdraft and waiting for the 120 days and getting paid the full invoice value

No doubt Peacocks will claim that their suppliers are getting paid in 10 days, but they're not are they? They're getting paid in 130 days and borrowing money at 8% a year for 120 days. Could this 'helpful' initiative for suppliers instead be nothing more than a disturbingly clever ruse to hide what in reality are terrible payment terms?

Monday, 14 January 2019

Are we just victims?

The issue of late payments is often characterised as a big vs small issue; namely big companies exploiting the weakness or naivety of small companies and hanging on to cash they should be handing out to their suppliers. I’m wondering though whether this is leading to a bit of victim culture in which us small players feel helpless and unable to affect our position. Is there another way of looking at it and is there something we could all do, with very little effort, to help ourselves?

Now notwithstanding the often punitive terms that are rife in certain industries, these aren’t my beef here though they are cynical to say the least, I’m just looking at getting compliance with the terms of payment that are agreed. I’m also not excusing systemic policies where a company actively pursues a programme of avoiding paying to terms; they deserve all the stick that comes their way.  Big guys are supposed to know how to behave and have responsibility to do so. But their systems, designed for their own benefit of course, are often inflexible and need understanding and compliance from suppliers if they are to deliver what the supplier wants ie: correct payment, on time, as promised.

Lets not assume also that its exclusively a big vs small issue here. Small companies are just as likely to shirk their obligations to pay when the pressures on their business are high, or they are just not very competent. 

Whatever the size ratio, there is stuff we can all do to minimise the chances of the other party hanging onto to money that is rightly ours. Its not rocket science, just requires some understanding and diligence, but once its in place it becomes a habit and in most cases you may end up being respected for your professionalism and have your reputation enhanced.

The experts at MCC have encapsulated a lot of this knowledge into a short email-course of bite-size chunks that you can always find time to read and digest in your hectic day. Sign up and just become better at business rather than a victim.

1. The Importance of Good Credit Control
2. Giving Credit is Optional - how much should you give?
3. Are Your Invoices up to Scratch? - your invoice can help get you paid
4. Best Practice to Get Paid on Time - offering strategies to ensure customers pay you
5. Applying Interest and Compensation to Overdue Invoices - your statutory right
6. What to do if a Customer Goes into Administration
7. How to Spot a Bad Debt Before it Happens

Despite all the things you can do to become a payments expert, if it still doesn’t work you can always get MCC to do it for you, and often at no cost to you. Click here to find out how.

Monday, 19 November 2018

Avoiding Bad Debts at Year End






Avoiding Bad Debts at Year End

It’s that time of the year again where many businesses start to think about their financial year end.

One area that your Auditors are going to be particularly interested in is the number of overdue invoices on your ledger at the end of the year.  They may well suggest that you make a provision for any invoices over 90 days  in your accounts. What this means is that your profits would be reduced by that amount. If you have not run a debtors report for a while you may be surprised at just how much is still waiting to be paid.  Depending on how much is overdue that could be quite a hefty sum coming off your bottom line!

With many companies aligning their year end with the calendar year, and with the holiday season to take into account, that means that there’s now less than six weeks to go till your customers do their final payment run of the year.  So now is the time to be following up on your unpaid invoices. All your customers will need contacting with swift action to resolve any issues to ensure you make that payment run on the 21st December.

Your staff may not have the time to do this which is where our short term credit control project services come in. We have helped many companies clear up their debtor books of old, slow moving payments.  So why not pass us your invoices over 60+ days to collect, so you can start next year with a fresh debtor book and post the best profits for this year?

It’s your money and profit after all!

Friday, 16 March 2018

Debt insurance claims rise

We’re always banging on about just how much money is owed to SMEs by late payers, but forgive us, as sorting it out is what we do and we are committed to helping to deal with the situation. The latest study by Previse, a Fintech business aimed at expediting prompt payment by large buyers, reckons that SMEs have had to take out £31.5 billion in funding to bridge the late payment gap. One in five companies are waiting more than 90 days for their bill to be settled and ¾ of them have had their company compromised because of late payment. This late payment culture is killing the competitiveness of UK business. It would be naive to think that extending terms with a supplier comes at zero cost. Prices will go up, suppliers will look elsewhere, the relationship gets soured and that benefits neither party. But as we stand, that’s the culture in many companies in the UK.

For those companies that can afford it, insuring yourself against this kind of sharp-practice and the risk that it leads to default is one way forward. But even that is now beginning to get harder and inevitably more expensive. The Association of British Insurers (ABI) have just reported that 2017 has had the largest number of pay-outs since the crash of 2009, a whopping £225 million. If you can’t get insurance for your customers credit risk or its just too expensive, then it will drive decision making and the ‘friction’ of doing business in only one direction. That has to be a bad thing for UK plc.

Against this background, it surely adds even more weight to putting these ‘sticky’ debts into the hands of professionals. If you don’t want to pay the insurers rates, or won’t even be considered by them, then as soon as a debt becomes due, even one day over term, pass it to a body like us to quickly and efficiently get your money for you. Its very cost effective, or even cost neutral, and the sooner we are engaged, the quicker you get your money, and the risks to your business are minimised.

Sunday, 31 December 2017

The Problem with Retentions






A retention is a percentage of the value of a construction contract which is held back by the client as an assurance that the project will be completed and as a safeguard against defects which may subsequently develop and which the contractor or subcontractor may fail to remedy. Retentions can be held first by the client employing the main contractor and this typically filters down into all sub-contracted work on the project throughout the supply chain as the contractor applies retentions to its own subcontractors.

It is not uncommon for a tier 1 main contractor to have 50-70 tier 2 subcontractors on a project.  In complex projects, it can be that tier 2 businesses subcontract in turn to a tier 3, of possibly 30 subcontractors for a total of 1,800 companies in tier 3 of a project.  Government estimates the total amount of money being held in retentions in a given year at around £4.5 billion.

Retention payments are normally split into two halves.  The first half is paid to the subcontractor when then works are completed - termed 'practical completion'.  The second half is then held back for what is known as a 'defects liability period', typically lasting 12 months.  During this time the subcontractor is expected to return to site to put right any problems that have been identified with their work.

The amount of the retention varies depending on the type of contract, its value and the industry sub-sector, but the average value is 5% of the contract value. 

Concerns have been expressed by many in the construction supply sector chain that unjustified late and non-payment of cash retention has serious negative impact on small businesses.  Independent research commissioned by the government confirms this view:



  • Delays in paying retentions appear to be commonplace, with average delays of several months.
  • The delays in payment of retentions get longer the further down the supply chain a business operates.
  • Subcontractors further down the supply chain were also much more likely to be affected by non-payment of retentions
  • Amendments to the Construction Act made in 2011 made it unlawful for a contractor to withhold retention payments from a subcontractor from one contract based on their performance on another contract.  However, the research found evidence that a number of businesses continue to link the payment of retentions to the subcontractors performance on other contracts.
  • Subcontractors are exposed to the risk of upstream insolvencies, where a business in the supply chain above them goes insolvent.  Retention money is not ring-fenced, but instead is kept in the general bank account, so the subcontractor would become an unsecured trade creditor like any other, with little prospect of recovering the money.
  • Some retentions are set at an onerously high rate (well above the average value of 5%), and for unreasonable durations on the defects periods


In late 2017, government launched an industry consultation on the practice of cash retention under construction contracts.  The consultation aims to

  • Assess the efficacy of existing measures aimed to help with late payment, measures such as the Prompt Payment Code and Construction Supply Chain Charter
  • Measure how much late or non-payment of retention monies is for genuine reasons, and how much is not justified
  • Find out how big a problem it causes when companies go insolvent while owing retentions
  • Assess how widespread is the practice of withholding retentions for one contract based on obligations under another contract



Government is also considering some possible measures to help such as  a statutory cap on the amount of a retention and the length of the defects liability period and ring-fencing the cash held on retention.  Ring fencing could be achieved by having project bank accounts, retention bonds or escrow accounts, or a retention deposit scheme


If you operate in the construction industry and have been affected by late or non-payment of retentions, perhaps you should have your say by completing the consultation.  In the meantime, My Credit Controllers has a proven track record in helping subcontractors release unpaid retentions from clients.  Why not get in touch to see how we can help?

Sunday, 22 October 2017

How to Find Out if a Company Has Gone Bust

Check if a company has gone bust
New online service to check whether a company is still trading


A couple of years ago, we wrote an article on the My Credit Controllers website sharing some tips for people that wanted to find out whether a customer that owed them money had gone into administration, liquidation or receivership.

In the article we described how to use the online search tools at Companies House and the London Gazette to get confirmation about whether a company is still trading or not.  It has become one of our most popular articles - clearly it's a real concern for businesses that are chasing for money when a debtor 'goes quiet' and stops answering the phone or responding to email - are they just avoiding you or are they really in trouble?

Companies House is  the ultimate authority for business information.  It is the archive of record for UK businesses. It has an excellent search tool and you can search for a company name and look to see what trading status for the company is currently held on file.  You can be really certain that if Companies House says a company is 'Dissolved' that it's gone.  Finished.  An ex-company.

The problem with Companies House information is that it can take months to update.  For example financial accounts relied upon by credit rating agencies do not have to be submitted until 9 months after the end of the financial year to which it relates.  The information here is accurate - eventually, but this is of little solace if you've been wasting your time chasing someone for payment when they went into liquidation months before.  You may even have missed your chance to register your debt with the Insolvency Practitioner looking after the case.

This is where the London Gazette comes to the fore.  The Gazette is the journal of record for the UK government and certain statutory notices are required to be published in it.  The Gazette has been digitised and all issues are available online with a search tool.

Included among the notices of government laws coming into force, appointments in the armed forces, and changes of coats of arms are notices of insolvency proceedings for businesses and individuals.  Insolvency practitioners are required to submit notices to the Gazette - for example announcing their appointment and dates of creditors meetings.  Applications to the court for a winding up order against a company and the outcome are also posted.

The Gazette is comprehensive and bang up to date - notices have to be placed within a short time period.  It's drawback is that for a non-specialist the interpretation of all the different insolvency notices can be difficult to understand.  The sheer variety of the topics the Gazette covers can also make searching a challenge.

It is for these reasons we came up with our new online  Company Check tool.  You simply start typing in the name of the company you are interested in and it searches Companies House to give you a pick-list of companies.  Select one of these (or if it's not on the list type out the name in full) and the online databases at Companies House and the Gazette are searched and the results from both analysed to produce a simple summary in plain english.   If you're worried about the trading status of a company - be they supplier or customer, why not give it a try?

Company Check - Online tool to check whether a company has gone bust

Thursday, 24 August 2017

Extreme Debt Collection Methods

Some trainee debt collectors in action
I’m sure there are many pre-conceptions about how debt collectors work, or how an effective credit controller goes about making sure that payments come in on time. However, I can say with total conviction that the tactics employed by a group of unofficial money-lenders in China are not part of the MCC portfolio.

It was reported in The Telegraph, the FT, The Sun and a few other places, that some rogue money-lenders had hired older ladies from outdoor dancing classes who then used highly intimidating tactics to get borrowers to pay up. Several of them have been jailed for doing things like shouting through a megaphone outside the debtors house to humiliate them in front of their neighbours, carrying out beatings, or even stripping naked in front of the debtor in the street and implying a sexual assault had taken place. Though Chinese authorities eventually caught up with this gang, imprisoning many of them for long sentences, here in the UK the law is very strict on personal and company debt as we’ve written about before.

When pursuing overdue debts, here at MCC we recognise that we are bringing a contractual obligation by a customer back on track after its gone awry. The tactics will therefore be polite, unemotional and business-like, but with a clearly articulated end-game where the debt is paid off to our client’s satisfaction. The outcome is not in doubt, we are just determining how we are going to get there. So far, shouting in the street, violence, or taking your clothes have not been necessary for us to collect millions for our clients. I, for one, am very pleased about that.