How late a payment culture adversely affects SMEs

One of the biggest problems faced by UK SMEs is the culture of late payment that is endemic in our business world. Not only are late payments undermining the growth opportunities for small businesses, but it’s also affecting the value that they could bring to the UK’s economy.

Late payment from customers is a problem that has been around for many years, and unfortunately research shows that it’s still far from being eradicated. It is estimated that 62% of invoices issued by SMEs in the UK in 2017 were paid late. This equates to a figure of £21 billion and was up from 60% recorded in 2016.

Cash is king

Cashflow is all important, but particularly for small and medium sized enterprises. Without it, even the most innovative and exciting business can fail if they don’t receive the payments they’re owed. Without a steady flow of ready cash to deal with unexpected expenses, businesses can quickly go under. And one of the most important aspects of maintaining workable cashflow is being paid on time.

It’s no surprise that SMEs are at their most vulnerable when they are just starting out, and too many missed or late payments can scupper their chances before they even get started.

The average value of the invoices that went unpaid, according to the survey mentioned earlier, was £51,826. A third of invoices settled late took longer than a fortnight from the cut off date agreed, with some taking up to six months to be paid.

SMEs are most vulnerable

The Federation of Small Businesses (FSB) published a report in 2016 that cites the urgency with which the Government must tackle late payers. They found that part of the reason why there is such a problem is ‘supply chain bullying’. Payment terms for larger businesses often include ‘unfair contract terms’, which has an impact on small firms.

Late payment costs small businesses in the UK about £2.5 billion every year. Official figures from the FSB report show that a third of payments to SMEs are late, with an average payment value at £6,142. All of which means around 20% of small businesses facing cashflow problems specifically because of late payments.

Bleak as this sounds, the encouraging part is that the Government is doing something about the problem of late payments by standing up for small businesses. For example, at the end of 2017, Business Secretary Greg Clark announced a newly created role of Small Business Commissioner.

The role was introduced to ensure that fair payment practices are followed for the UK’s 5.7 million small businesses and was taken by Paul Uppal. It also offers support in resolving late payment problems with larger companies and is working to bring about substantial changes in payment practices across all business sectors.

James Turner, managing director of Turner Little Limited (turnerlittle.com) said: “There are still millions owed to small businesses in the UK across many different sectors. This is obviously a massive problem for SMEs, particularly when they’re attempting to get off the ground. It’s hoped that the Government will continue pushing back against the endemic culture of late payment, particularly from larger companies.

“Cashflow is the heart of industry, and small businesses can’t survive, grow and thrive without it. The importance of SMEs for the UK economy can’t be underestimated, particularly as we head towards leaving the EU next year. The Government needs to take more steps to support small businesses as we move forward.”

About Turner Little

Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and Offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.

How FinTech Can Help Banks Reach Goals in 2018

A lot has been written about the relationship between traditional banking and FinTech. The most common thought? The astounding rise of the world’s FinTech market and how it will affect the banking industry. The general opinion is that the constant progress of FinTech will one day spell the end of the banking system as we know it.

What is FinTech? It’s defined as ‘computer programs and other technology used to support or enable banking and financial services.’ Advances in its technology include mobile functionality, simplicity, big data, accessibility, cloud computing, contextuality, personalisation and convenience.

Traditional banks have few of these qualities and therefore rely on something FinTech start-ups haven’t yet mastered – trust, security, significant capitalisation and customer indifference. But according to Starling Bank’s report, traditional banking consumers are fed up. The top frustrations with current UK banks being:

  1. Unclear and complicated language and charges.
  2. Complicated products that don’t fit with lifestyle.
  3. Processes and technology that takes too long.
  4. A superior or unhelpful attitude.

From this, it is understood that the technological innovation FinTech provides could help traditional banks reach their goals and appease fed up consumers. Indeed, in 2018, a partnership of the two presents boundless opportunity.

The top business benefits of partnering with FinTech technologies, per ACI’s FinTech Disruptors Report*. include the ability to generate new revenue streams (64%), the ability to enhance customer experience (59%) and the ability to offer new applications – at 56%.

Chris Skinner, Chairman of the Financial Services Club, comments:

“Start-ups have no existing structure to change so they can change everything. The challenge is how to convince customers to change. Incumbents (traditional banks) have millions of onboarded clients and so to change anything takes time.

Most have the time though, as customers are slow to change. Fundamentally, both are facing two very different challenges – FinTech’s are creating while the incumbents are converting.”

By embracing themes, like openness, collaboration and investment, banks can afford to disrupt their own business model rather than waiting for challenger models to do so. However, traditional banks are anticipating this by creating new businesses within their existing structures that adapt and collaborate to meet these challenges and to make better, faster use of customer insight. A key competitive advantage.

A FinTech and Bank Partnership

Further to ACI’s Report, more than three quarters of banks, and a similar proportion of FinTech groups, identify partnership with the opposite camp as an essential ingredient to meeting the challenges of institutional inertia.

In fact, 80% of banks agree with their FinTech peers that FinTech is a viable, even essential path to the future. The top three ways embracing technologies can help banks meet their goals, according to ACI, include engaging in partnerships with FinTech (78%), expanding existing partnerships vendors (57%) and leveraging cloud technology – at 44%.

In 2018, banks’ new approach to FinTech is more about seizing opportunity and changing customer needs than defensive strategies to mitigate risk. Turnerlittle.com observed statistics from the same ACI report, to outline the exact areas where banks want to partner with FinTech:

  1. Payments – 68%
  2. Banking infrastructure – 43%
  3. E-Commerce – 40%
  4. Remittances – 37%
  5. Security and fraud management – 32%
  6. Consumer banking – 29%

Financial institutions see the greatest opportunity in payments – with nearly 70% identifying this as a key area of interest – followed by 43% interest in banking infrastructure.

Equally, e-commerce is a focus for 40% of banks and remains a major focus for FinTech too, suggesting that the current period of development is proving productive in terms of aligning interests and establishing goals between the two industries.

*ACI’s report considers findings from an industry-wide survey of banks and established financial institutions, FinTech start-ups and ecosystem participants alongside insights from over 20 interviews with financial institutions across Europe, FinTech founders, investors and enterprise-level technology firms.

Feature image credit: whiteMocca/Shutterstock

How to Save for a Holiday

There’s no doubt about it: holidays are an expense. Whether you opt for budget or high-end, you’ll need to set a fund aside. Putting your holiday on a credit card is a danger and can add hundreds of pounds to the cost; and perhaps one you can’t pay back immediately. To save up for it, honestly and earnestly, is a far better option. Therefore, Turnerlittle.com highlights some the following tips to show you how to save for a holiday and reach your target; relaxed and worry-free.

Cash or Credit?

Firstly, let’s consider paying by cash or credit. Paying by credit is only a good idea if you have the means to pay off your bill quickly and in full. Otherwise, you could be paying hundreds of pounds extra in interest. Some travel firms will also charge you a fee for using a credit card to pay for your holiday.

It is therefore better to save up the full amount in cash, first. This then allows you the option to pay for your holiday using a credit card, with good intention, and will also mean you are likely to be protected under the Consumer Credit Act. This means you might be able to make a claim if the airline or holiday goes bust or the holiday isn’t as described.

However, it may be that you already have similar protection if your holiday is covered by ATOL. Always check this.

Set a Budget

It’s essential to work out a budget for your holiday. Once you work out a rough total, you can consider what you will need to put aside and save each month until you travel. First, make a list of all the items you will need to take care of before you go. This may include:

  1. Travel money
  2. Travel insurance
  3. Accommodation
  4. Sun cream/toiletries
  5. Travel (flight or fuel costs)
  6. Holiday clothes and swimwear
  7. Car hire (and car excess insurance)

Secondly, think about your day-to-day expenses. Consider excursions and day trips, entertainment, food and drink, and holiday tokens and treats! Set aside enough money to cover these costs and you will identify your savings goal.

Image credit: Syda Productions/Shutterstock

Start Saving

Research shows people who treat saving as a regular expense are more likely to reach their goals than people who try to save whatever is left at the end of the month. So – start saving!

Treat putting holiday money aside the same way as paying a bill, and commit to a regular sum each month or week.

Be realistic. It’s better to commit to a small, manageable sum than a total beyond your means. If you’re not certain you can afford to save, try putting spare change into a jar each week. If this works, set aside a bit more each week and build from there.

Name Your Goal

Giving your goal an identity will help you to achieve it. Try labeling a separate savings account with the name of your goal – be it ‘romantic weekend’, ‘the dream fund’ or simply the name of your destination. This will spur you on to save.

 

Image credit: Yuganov Konstantin/Shutterstock

Remember, if you start out saving in a coin jar, make sure to transfer your money to a savings account with a good interest rate; this may top up what you’ve managed to collect.

It’s possible the bank you are with will let you set up a separate pot for your holiday fund online, so check if this is possible. Otherwise, you might be able to open an instant access savings account.

Compare Prices

Price comparison websites make a good starting point if you want to find a savings account tailored to your needs. However, it’s important to remember comparison websites might not give you the same results; make sure to visit more than one site before deciding.

This is also a useful tool when you are looking to compare good value hotels, flights or excursions, so make full use of the information you have access to before you sign on the dotted line.

Watch Your Savings Grow!

Finally, keep a check on your savings regularly.

It might help to set small, manageable targets along the way and treat yourself as you make each one. When you reach your goal for this year’s holiday, set a new, possibly higher target for next year to help speed the next cycle along.

Remember to take your money-saving habits on holiday so not to overspend, unnecessarily.

Feature image credit: ShutterOK/Shutterstock

The Highest “Death Rate” in Business, REVEALED

Per the Business Demography release, published by ONS in November 2017, there were approximately 2.85 million active businesses in the UK in 2016; an increase of 135,000 on 2015.

The research details the number of business births continued to increase from 383,000 to 414,000 between 2015-16, a birth rate of 14.6%.

“Birth rate” definition: New business registrations are referred to as business births. The birth rate is calculated using the number of births as a proportion of the active enterprises.

In 2016, the highest rate of business births continued to occur in business administration and support, at 23.1%, compared with a rate of 20.4% in 2015. The second-highest rate occurred in transport and storage, at 23%, compared with 20.3% in 2015.

London had the highest business birth rate, at 17.5% – followed by the East (15.8%) and West Midlands (15.5%.) Northern Ireland has the lowest birth rate, at 10.2%.

Image Credit: Sergey Nivens/Shutterstock

Since 2011, the rate of business births has continued to exceed the rate of deaths and the gap in rates has continued to widen in recent years – until 2016. This may reflect the uncertainty around the economic outlook towards the end of 2016, following the UK’s EU referendum’s results.

Indeed, the number of UK business deaths also increased from 283,000 to 328,000 between 2015-16, a death rate of 11.6%.

“Death rate” definition: Businesses that have ceased to trade are referred to as business deaths. The death rate is calculated using the number of deaths as a proportion of the active enterprises.

The highest business death rate, at 17% is seen in finance and insurance, compared with 13.3% in 2015. Followed by business administration and support, at 15.4% – compared with 10.1% in 2015. Turnerlittle.com sought to identify the top 10 businesses with the highest death rates:

From the infographic created by Turner Little, we can see that whilst finance and insurance (17%), business administration and support (15.4%) and property (15.2%) hold the top 3 highest death rates, exceedingly low death rates can be found in transport and storage (10.9%), production (20.8%) and retail (10.5%.)

The region with the highest business death rate was London, at 14%, followed by Scotland at 11.8%. Northern Ireland had the lowest death rate, at 9.2%.

Furthermore, it was found the UK five-year survival rate for business born in 2011 and still active in 2016 was 44.1%. By region, the highest five-year survival rate was seen in the South West, at 47%, while the lowest was in London, at 41.7%.

By broad industry, some notably high five-year survival rates include health, with a survival rate of 54.1% and property, with a survival rate of 51.1%.  Accommodation and food services had the lowest, with only 34.6% of businesses surviving for five years.

Image Credit: Rawpixel.com/Shutterstock

Certainly, in the creation of new business, no matter the industry, there is huge risk. Entrepeneur.com highlights risk to be accredited to 5 key areas:

  1. Product Risk

If you can’t explain what you sell, why you’re selling it and why people should invest – you won’t secure interest and sales.

  1. Market Risk

Knowing your customer and why, how and where they buy related products is arguably the most important risk factor to assess before launching a product.

  1. Financial Risk

Make sure to identify key business milestones and schedules that clearly identify the points in time when equity or debt investments are necessary to reach the next major milestone.

If you can articulate your business plan, growth path and reach each milestone successfully, this builds confidence in potential investors.

  1. Team Risk

Invest in people who believe in your company and instil a sense of confidence that they can help get your company across the finish line – and maintain it.

  1. Execution Risk

Many entrepreneurs can become so mired in the details that they completely lose sight of the overall company trajectory and strategy. Participate, evaluate the risks and don’t be afraid to pivot.

Managing director of Turnerlittle.com, James Turner notes:

“It is obviously, incredibly important to evaluate all types of risk when thinking about starting – or investing in – a business. Financial loss can be devastating.

However, the potential for failure should never put you off trying. My advice would be to research, thoroughly, read case studies, speak to people who have both achieved success and faced loss, and always tread with awareness.”

Image Credit: Sergey Nivens/Shutterstock

Feature Image Credit: Sergey Nivens/Shutterstock