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Andrew Raymond, CEO of Bolero International, shares his advice with Finance Monthly.

Reliance on paper documentation and manual processes means banks are struggling to meet the needs of exporters and importers as we emerge from the COVID-19 crisis.

The demand for fast digital services with minimal human involvement is gathering pace as global trade prepares itself for the big task of recovery. The WTO (World Trade Organisation) estimates trade could plummet by anything between 13% and 32% this year alone.

The critical role of paperless trade systems in fostering recovery is recognised in the ten-point plan issued by UNCTAD (The United Nations Conference on Trade and Development), which makes their introduction a key priority.

Apart from sheer speed of transfer, electronic versions of essential trade documents have the distinct advantage of not being held up at borders or lost during movement restrictions. This has become a vital attribute. Bills of lading, for example, are crucial trade documents that serve many purposes. Created by carriers, they can be used by exporters to draw under letters of credit from the buyer’s bank payable at sight, or to obtain finance in case of deferred payment. As “documents of title”, they confer ownership of a shipment and are forwarded to the buyer’s bank in exchange for payment against the letter of credit. The buyer will also use the bill to claim the consignment, once delivered.

The demand for fast digital services with minimal human involvement is gathering pace as global trade prepares itself for the big task of recovery.

Clearly, severe consequences ensue if documents such as bills of lading go missing or are held up. Fees and penalties mount as cargoes sit in port longer than necessary. This is where the advantages of digitisation are most obvious. Exchanged on a secure, purpose-built trade digitisation platform, trade finance instruments, electronic bills of lading (eBLs) and other digitised trade documentation, take hours to process instead of days or weeks for paper equivalents.

This is why banks are more likely to invest in paperless systems in the aftermath of the coronavirus pandemic. Yet digital trade finance solutions vary hugely and corporates must take care they do not sign up to services that are poorly designed, lack connectivity or have little acceptance in the wider trade sphere.

Here, then, are five points for corporates to ask a bank when it comes to trade digitisation.

1. Can you manage everything end-to-end from a single interface?

Any digital solution in trade finance must be comprehensive in every sense. From a single interface it should be possible to manage all the documentation required to support a transaction.

A single interface should provide simple access to multiple banks for fast comparison of credit lines, rates, fees and offers. This is the primary means by which corporate treasuries will improve their cash flow and use of working capital. Fast access to a wide choice of credit lines also reduces the need for expensive bank instruments.


2. Does the solution bring everyone together?

Buyers, sellers and carriers – they all need to be on one platform. There needs to be a good, secure flow of information between all parties. Your bank’s digitisation solution should connect seamlessly with your back-office and your own eco-system, giving access to alternative funders and third-party providers such as logistics companies, carriers, insurers and counterparties. This is connectivity that should be easy and open to increase efficiency and provide customisation.

3. Does the bank and its proposed solution have the necessary expertise in-built?

It’s vital to ask if a bank and its solution-providers have the necessary understanding of trade flows and how your business fits in. Does the proposed solution have a proven network of users among banks and significant corporates, and is it sanctioned by national authorities and recognised within the trade community? Many platforms focus on their integration with emerging blockchain solutions. This is important but still requires a current network of users and documents based on real working practices in global trade.

4. Is the platform secure, compliant and fit for trade after COVID-19?

A critical electronic document such as an eBL must be underpinned by a respected body of law, such as English common law, to give both yourself and customers greater confidence. A platform must also conduct compliance checking in line with international trade rules such as those prescribed by the International Chamber of Commerce eUCP which govern letters of credit.  For many corporates, the immediate post-COVID era will be one in which they cannot be certain of the solvency of their trading counterparties. Know Your Customer protocols need to part of the solution but not so laborious they become a barrier.

A critical electronic document such as an eBL must be underpinned by a respected body of law, such as English common law, to give both yourself and customers greater confidence.

5. Does the solution offer visibility of bills of lading as well as letters of credit from multiple banks?

A digital platform must give corporates access to electronic bills of lading (eBLs) as well as letters of credit and other trade finance options.  As we have seen, bills of lading are critical documents, but often subject to change, which requires visibility and vigilance.

Ideally, a bank’s trade finance digitisation platform should offer you the ability to use critical trade documents such as eBL under any transaction. With so much competition in some of the toughest conditions ever experienced, open account trading is set to continue its dominance in cross-border transactions, so having access to eBLs is an important requirement.

These are just five points but they cover the main areas that corporates need to explore. It is important to weigh up the options quickly, but also to take the right decisions on trade document digitisation in order to maximise revenues as the world recovers from the pandemic and new rules apply.

Well, all too often these processes utilise simplistic methods, such as spreadsheets. This ignores the multiple benefits that more technologically advanced processes can bring, most notably far greater accuracy. More accurate forecasts will help businesses in many ways, from securing funding from banks or investors to identifying future shortfalls. While rethinking how to approach cash flow forecasting will always be relevant and beneficial for businesses, in today’s uncertain climate of business instability due to COVID-19, it is especially important. 

In fact, cash flow forecasts are almost useless if they are inaccurate and it is only the businesses with accurate forecasts that will flourish. Accurate forecasts allow businesses to run predictably, generate funding and make informed decisions on capital investment. In contrast, inaccurate forecasts can lead to potentially devastating outcomes. At the lighter end of the scale, an inaccurate cash flow forecast can result in missed opportunities while the business had surplus cash in the bank. Whereas, at the heavier end, an inaccurate forecast could lead to overtrading and the end of the business. It is clear that this must be avoided and remedied, but how? Andy Campbell, Global Solution Evangelist at FinancialForce, shares an alternative method with Finance Monthly.

The Difficulties

Although popular, the spreadsheet presents many issues as a tool for cash flow forecasting. The first of these is that future income and future expenses are typically completed in monthly increments. This is an issue because it means that the future is generated using data from the past so by the time the forecast has been generated, the data is out of date and, therefore, no longer accurate. Another issue is that it takes a lot of time to assimilate data from the many different sources required for this process which causes further delays. A solution to this problem is that all data from each department be made visible to the finance teams so that they can create an accurate and real-time data set.

A well-built data set will become the foundation for accurate forecasting, so it must be able to process the variety of data produced by each department. This is because companies generally process a combination of both product and service-based revenues. Therefore, the data set must be able to manage both of these sources and their different payment structures.

Although popular, the spreadsheet presents many issues as a tool for cash flow forecasting.

Volatility presents another difficulty to be reckoned with. As the current pandemic has shown, volatility can come in unexpected forms and not all can be protected against. However, preparation is key, and some volatility is more predictable. For example, businesses themselves are volatile by their very nature with the changing of business models in line with the latest developments. Therefore, it is to be expected that business revenues would also be prone to volatility. This can be mitigated against by ensuring that all data has human oversight and is regularly reviewed. Doing so will ensure that any projection is in line with the company’s strategy and should prevent unexpected outcomes.

Cash flow forecasting comes hand in hand with revenue forecasting, which is the greatest of all these challenges. Revenue generation crosses all departments: starting in marketing, it is then delivered by sales, realised by operations and, finally, measured by finance. As already stated, the collating of data from multiple departments is tricky, revenue generation crosses all departments so presents a tangible difficulty here. Currently, the typical finance department addresses this using a complicated interlinking system of spreadsheets which often presents further problems. Another issue is that there can be disconnect between departments where a lack of trust means that data is not readily shared. To solve this, businesses must remove the culture where each department treats its goals separately rather than looking at one overarching goal and working together.

How to Overcome These Difficulties

The problems can be broken down into two main categories – technology and people. In terms of people, this comes down to the business culture and only a business that can successfully change its culture will be able to successfully implement new technologies. It is very important that employees are properly briefed and trained in the new processes or technologies that businesses want to implement so that they feel part of the processes and are adequately prepared. Simply enforcing a new process and expecting it to be a success will not work and there will be no visible improvements to the business.  Successful change to a business culture, at all levels of seniority and across all departments, will result in more tangible improvements.


In regards to technology, the days of spreadsheets are over, it is time to retire them and let new technology take over. Finance needs to have clear and direct visibility into active opportunities to be able to generate accurate cash flow forecasts. A simple way to do this is to integrate the CRM with finance which will give a window directly into the required processes. The data set can be further strengthened using data from the past, for example past win rates and payments can indicate what the future may hold. AI can analyse historic data sets to identify customers who were slow to pay in the past and, therefore, are likely to be slow to pay in the future.

Ultimately, the more integrated a business is, both in terms of people and technology, the more smoothly it will run and the better its outcomes will be. Having a finance team that can produce accurate cash flow forecasting and a business reaping the rewards is not as difficult as it may seem. There are tools and technologies to help along the way. It is time to say goodbye to spreadsheets and to embrace the new way to approach cash flow forecasting.

When you are in control of your money, you have more power and flexibility to craft the lifestyle you want. You have an excess of money coming in and a handle on the money going out, so you don’t feel stressed or pressured by your finances, even when a surprise emergency expenditure occurs. Being in control of your money is a critical element of being in control of your life — but for some reason, you just can’t manage to do it.

Believe it or not, it probably isn’t a mystery why you still aren’t in control of your finances. Consider the following list of reasons why many people fail to manage their money, and think about making some changes to the way you live to keep your earning, spending and saving in check.

You Are Neglecting Your Debt

You will never be in control of your money if you don’t first gain control of your debt. Debts can accrue slowly, over time through things like credit cards, and debt can appear suddenly and massively in the form of a car or home purchase or student loans. Equally easy to accrue is business debt, which will impact many more people than yourself if allowed to grow unchecked. If you are suffering from a serious amount of debt, either personally or in your business, ignoring it will only make your financial situation worse. A much better strategy is understanding what your debt is, where it is and how you can systematically gain control of it to benefit your finances overall.

There are all sorts of tips and tricks for dealing with debt in a constructive way. At the very least, you need to be making your minimum monthly payments, but you might consider the snowball method or the avalanche method to rid yourself of debt faster. Debt isn’t inherently a bad thing, but you need to have a handle on it if you want greater control over your money.

If you are suffering from a serious amount of debt, either personally or in your business, ignoring it will only make your financial situation worse.

You Are Spending Frivolously

One reason your debt might be out of control is that you can’t manage your spending properly. Even if you start with a great fortune, you can lose it rapidly with excessive spending on things that don’t add to your wealth or the betterment of your business. Typically, frivolous spending isn’t merely buying yourself a coffee every morning; it is buying a coffee, buying lunch out, buying dinner out, buying new clothes, buying home décor and buying other things you really don’t need. In short, improper spending is a habit that you need to work to break.

Again, there are several strategies for overcoming this bad habit. Perhaps the best is employing money management software, which helps you track your spending and apply it to a carefully created budget. It is much easier to control your money when can see exactly where it is going and when you can see that the changes to your spending are having a positive effect on your finances overall.

You Aren’t Increasing Your Income

There are two ways to build your wealth: stop sending money and increase your income. If you have your spending under control, but you are still struggling financially, it might be that you don’t have enough income to manage your current lifestyle. In general, having more money makes it easier to manage your money because you don’t need to worry as much about covering necessities like food, rent/mortgage and utilities. The absence of financial stress allows you more freedom to experiment with money management strategies, which can be fulfilling and fruitful.


At present, increasing your income might be a difficult prospect — but that doesn’t mean you shouldn’t try. If you are currently employed, you might ask your employer for a raise; a 10 or 20 percent raise every year or so will help your salary remain competitive in the market and meet the demands of inflation. You might also consider obtaining a side hustle, either a second job during your typical off hours or else a way to turn a hobby into a money-making endeavor. However, it’s important to remember that your life shouldn’t only consist of work; you need time for yourself to avoid burning out and losing all income.

Everyone wants to have impeccable personal finance skills, but the truth is that not everyone has the discipline to build them. It takes time to develop the knowledge and habits necessary for excellent money management, and if you are intent on gaining control of your finances, you should start paying attention to your debt, reducing your spending and increasing your income today.

While it may sound obvious to conclude that the net profits of a business are the most important indicator with which to measure a company’s worth, the reality is that cash flow is just as important, and sometimes even more so. There are a lot of reasons for this – one would be that profits can be manipulated in the income statement more easily than cash on hand can. Net profits may be seen as a theoretical concept, while the cash that is accessible to the business is the more concrete way to see how an enterprise is actually doing.

Consider how profits can be determined largely in non-cash terms – they can be in the form of assets such as receivables. Some of these decrease in value over time, which limits the accuracy by which profits are measured. Some receivables can even be totally insignificant in the future – if for example a client pays too late, or worse, if they don’t even pay at all – then the asset that determines the value of the corresponding net profit decreases, which decreases net profit as well. This is the reality of business – that is why it is important to manage your cash flow wisely.

Cash flow measures the liquidity of an enterprise – and this is indicative of your overall paying capacity. The bigger the amount of cash the business has on hand, the more reliable they appear to their employees, suppliers, and other creditors – these entities can rest assured that they will be paid their due in a timely manner.

These are just some of the reasons why it is important to effectively manage the cash flow for your business. Here are some ways you could do that:

1. Collect your receivables as soon as possible.

If possible, have your customers pay immediately upon delivery or before they receive the goods or services they ordered from you. Prepayment is the best option, and it works – this is how most eCommerce businesses conduct their transactions. They usually ask for proof of payment before they deliver the items to their customers.

If possible, have your customers pay immediately upon delivery or before they receive the goods or services they ordered from you.

If prepayment is not possible, push for cash payments upon delivery. This is pretty reasonable for most retail-scale businesses.

For industry-scale trading, where the volume of goods and/or services and the corresponding amounts are considerably larger, do your best to get the shortest payment terms from your customers as possible.

Invoice them as early as you can. This will ensure that you have done your part in guaranteeing timely payments. It will also show your clients that you are taking your collections seriously. This is the best way to be professional about your intentions.

2. Get more flexibility in terms of your payables.

You can ask your suppliers to extend you credit terms, and you can attempt to make this as long as they will allow. This will let you be able to keep your cash in your hands for as long as possible, giving you leeway to pay for more pressing concerns. Just make sure that you don’t miss your deadlines, as some suppliers may charge interest rates for overdue payments. This is something you should avoid at all costs – as it will defeat the purpose of the exercise.

3. Consider selling your receivables in order to get cash up front.

If you have initially already extended credit terms to your clients, you may find yourself in need of reprieve in future situations. Some clients may also be unreliable in terms of meeting deadlines. You have the option to sell your receivables to get the cash you need immediately. For example, some staffing companies enroll in payroll funding, where the financing company purchases unpaid invoices from you, allowing you to have cash 24-48 hours after the invoice is presented for sale. Sometimes, you can even get your money within the same day if you request this specifically.


This is a great way to manage your cash flow more reliably. If you have a long list of creditors, with receivables that won’t get settled any time soon, this may be a viable option for you.

4. Figure out ways to increase revenue.

You can get creative in terms of how to get more cash-based sales, so at least you have a steady flow of liquid assets. Offer discounts for cash on delivery or prepaid transactions; give incentives for customers who pay on time; and conversely, set minimal penalties for late payments, just so they’re encouraged to meet their deadlines, and be faithful to their terms.

These are just some of the preliminary guidelines that can help you manage your cash flow better. Remember that there are small ways you can tweak your cash flow to work in your favor, and explore workable options that will help lighten your load.

Emergency Government Loans Appeal to Only Half of UK Business Owners

Following the UK government’s recent announcement of further measures to be taken to shore up businesses against the financial impact of COVID-19, business finance lender MarketFinance has canvassed the opinions of business leaders and found that more than two thirds (67%) do not believe that government funds will reach them in time and that they will run out of cash before the 12th of April. Outlined in the press release below are the key results of MarketFinance’s research.


Only half (52%) of UK businesses are considering taking advantage of the Coronavirus Business Interruption Loan Scheme (CBILS which offers up to £5m, interest free for the first year, over 6 years) to shore up their businesses. Because most businesses (67%) have a pre-existing loan, their biggest concern (36%) is making repayments for any additional loan. Invoice finance (borrowing against invoices on completed work) ranked highest as an alternative to taking a loan, with 48% considering this option over the next 12 months, to avoid the addition debt burden.

Cash Flow

With revenue at companies across the country being hit hard, 80% reported a decrease this month of between 40-50%. They are seeking immediate measures to ease this pressure on cash flow. Business owners ranked a larger overdraft facility as first preference before seeking a business credit card and in third place, using invoice finance as a means to inject working capital into the business.

Anil Stocker, CEO at MarketFinance, commented: “Business owners are uncertain on revenue numbers for this year with a third expecting at least a 50% drop in sales and, rightly, weary of taking on more loans that they might not be able to pay back. It’s important to realise that in the fine print, many banks will ask for additional security and Personal Guarantees for loan amounts greater than £250,000 of borrowings.

The number of businesses that believe they won’t make it to Easter has doubled from a third to two thirds despite the Treasury’s announcements. Time is of essence. It is imperative that businesses are made aware on how to access the measures they have announced but also to widen the range of finance options available to them”.


Most (35%) business owners are turning to their accountants for advice on what to do next before consulting their friends and family (21%). Only one in six are seeking advice from their bank manager on what to do. Business owners feel their accountants are the most accessible given the remote working environment.

Accountant Rashesh Joshi at Alexander Rosse commented: “The government headlines from last week covered numerous initiatives to be implemented such as the CBILS scheme, the job retention scheme and a new lending scheme facility for larger firms amongst a raft of other measures. The reality on the ground is unfortunately unlike the rapid spread of the COVID-19 virus.

We have been in touch with a number of the accredited lenders and our colleagues at larger accounting practices. Feedback, information and practicalities of the application process and lending criteria are decisively in slow motion. It seems large institutions with all their resources had no contingency plans in place. We are aware of challenger banks and other businesses who could act quicker but have been frustratingly left out of the original process (but now invited) thereby losing further critical time as highlighted in MarketFinance’s research.”

Rashesh added: “We are partnering with our clients to help with their cashflow forecasts, rationale for the loan application, contingency plans, how they would cope with self-isolating staff and a whole raft of questions that the banks will ask before they will even consider lending. We are encouraging lenders to get with the reality on the ground which is frankly brutal. In our view the process needs to be simpler and quicker and bridging finance also made available to small to medium businesses".

Anil Stocker added: “Economies around the world are in a state of shock. In the UK, the government has poured billions in subsidies, grants and guaranteed loans for businesses, but nobody can be sure how well the rescue will work and how this money will be propagated around the small business community. It is critical that business owners have a prepared mindset for all scenarios. They will be heavily reliant on all their advisers – accountants, bankers and boards – to help them navigate the turbulence ahead.”

The government needs to urgently implement and deploy their policy announcements. Business advisers will play a key role in guiding businesses on the best finance options for them. It’s imperative they are up to speed with all the necessary information and nuances of what is available”.

International expansion features heavily in many businesses that are in their growth phase and is about more than just establishing an overseas branch or subsidiary, or deciding on which market to lay roots in. While tech firms lend themselves to cross border activity by enjoying a high degree of seamlessness and scalability, other knowledge-based businesses can also enjoy the benefits by outsourcing certain back-office functions or cultivating international sales networks.

By accessing new markets, trading overseas can substantially grow revenues, reduce the cost base by sourcing cheaper products or services, and provide access to new sources of finance and investment. The rewards can be significant, but it’s vital for business leaders to properly plan and execute their expansion. The process can be costly, with errors causing substantial losses and diverting attention away from the main priority of growing the business.

By accessing new markets, trading overseas can substantially grow revenues, reduce the cost base by sourcing cheaper products or services, and provide access to new sources of finance and investment.

The value of financial modelling

Businesses should be crystal clear on their vision for expansion and the key drivers for making that cross-border step. Being able to consider why they are looking to expand makes it easier for businesses to answer the more practical questions of how, when and where. For every successful expansion, there has been another that has failed because the benefits and risks had not been properly identified.

Three key elements are the strategy, business plan and financial model. Business leaders are typically excellent at articulating the first, good at designing the second but often neglect the third, despite all three being of equal importance.

So why is financial modelling so important? Most expansion plans require investment and put a strain on businesses’ cash before yielding an overall benefit, exacerbating an already acute problem in many scale-ups. A financial model helps to quantify the cash flow impact of starting foreign operations and includes modelling for certain scenarios. If a business is looking at selling into a new market, with support from a local marketing campaign and sales team, financial models can show the maximum strain on cash flow, allow for contingency planning where growth may be below expectations, and even identify where any external funding is required.

Three key elements are the strategy, business plan and financial model.

When building a financial model, it’s important to consider the balance sheet. Despite its focus on generating additional revenues or lowering costs, the balance sheet will also reveal factors not immediately apparent in an income statement, such as capital expenditure for new offices and equipment, poor credit terms due to limited local trading history, and local tax factors, such as VAT and income tax payments.

Putting the right systems in place

With new operations comes the requirement to put in place new structures and systems. There is no one-size-fits-all approach to system building. A remote sales office will be subject to different motivations and pressures from an outsourced development team, for example. Despite this, there is one overarching concern: control. Even with the developments in communication seen in recent years, a foreign operation will by default be more independent than domestic subsidiaries and branches due to distance, language barriers, business culture differences, different developmental staging and local management naturally enjoying greater autonomy.

To mitigate against these risks, expanding businesses should invest time and effort in building robust monitoring systems. Overseas operations should be required to report on a regular basis, maintain records on a common, accessible system (advances in cloud technology have substantially improved opportunities in this area) and make themselves available to a routine inspection or even an audit.

Founders and leaders should remain closely involved, not only at a strategic level but also on the relationship side. Communication with local teams is vital and whilst it should be clear that they are responsible to central management, their feedback should be listened to and where possible, acted upon. This has the dual benefit of reducing reliance on ‘management by numbers’.

When looking to expand overseas, it is crucial to fully understand the local laws and regulations to avoid being caught out.

Ultimately, the more freely data and information can flow, the lower the risk is of head office losing control.

Regulatory and compliance restrictions

When looking to expand overseas, it is crucial to fully understand the local laws and regulations to avoid being caught out. These can vary greatly from country to country and fall into three broad categories: employment law, taxation and reporting requirements. There may also be specific rules where businesses are operating in certain industries, such as manufacturing or financial services.

One key recommendation is for businesses to consult with local legal and financial experts before embarking on expansion. Good advice early on will always pay for itself, such as when considering employment and sales taxes in particular. By their nature, such taxes give rise to a liability on recurring transactions, meaning that if something is structured incorrectly, an error is made on every sale or every time the payroll is run. Left unchecked, the financial implications of these errors can be severe. This is especially true of the United States, where each state has its own employment and sales tax regimes, in addition to those imposed at a federal level, meaning there are two levels of legislative compliance to contend with.

Most law and accountancy firms are members of international networks and will be able to make introductions with accredited local experts at no cost. MSI Global Alliance, for example, consists of over 250 firms in 100 countries, allowing businesses to access coordinated advice both at home and in the country of expansion. This guarantees clients receive a global perspective, taking into account any effect on the UK position.

Describing activities aimed at ensuring that customers pay their invoices within the defined payment terms and conditions, credit management can protect businesses from late or non-payment; contributing to a healthy cash flow and profitability. An effective credit management strategy should be an essential part of any firm’s financial management, but what does it involve and what does best practice in this area look like?

With headlines in 2018 dominated by a number of high-profile financial failures, spanning industry sectors, the rise in corporate insolvencies in the UK came as little surprise.  One of the most common reasons that businesses become insolvent is poor cash-flow management, which means that while their profit and loss accounts may seem positive, they may struggle to make payments when they are due.

To help businesses boost their cash position and to avoid cash-flow difficulties, effective credit management is required to ensure customer payments are received on time. Rather than simply reminding customers to make payments promptly, credit management processes and procedures should be robust and comprehensive – from setting out the right terms and conditions when a new customer is taken on, to procedures for enforcement, should the worst-case scenario occur.

New business is often a key commercial focus for organisations, and owner-managers may be reluctant to have difficult conversations about payment terms for fear of damaging customer relationships. Similarly, they may find themselves extending credit lines or flexing their payment terms to keep a key client happy, without considering the impact on the business as a whole. Other common credit management pitfalls include a lack of investment in systems and dedicated personnel to monitor payments and ineffective processes and procedures for managing invoices and reminders.

Business managers must bear in mind that expanding their customer base will bring little value to an organisation unless customers actually pay their bills on time. When scoping for new business, companies can reduce the risk of late payment by conducting thorough credit checks for all potential new customers before contracts are agreed. However, it’s important to note that businesses’ credit risk can change quickly, so rather than conducting a review once a year or only at the start of a contract, this should be monitored on an ongoing basis, throughout the relationship.

Clear and ongoing communication with customers is also vital to ensure payments are received on time; allowing the business to maintain a healthy cash flow. In addition to keeping a good relationship, where margins allow, owner-managers should consider other methods of incentivising customers to comply with the specified payment terms, for example, offering discounts to those who pay before the due date.

Whether outsourced or managed in-house, businesses should audit credit management processes and procedures regularly. These audits should not only cover processes for issuing routine invoices and reminders, but also procedures for engaging a debt collection agency, and where necessary, starting legal proceedings. Whilst such measures are often regarded as a last resort, they could become necessary if all other efforts at recovering debts have been exhausted. Failing to prepare for a worst-case scenario, could result in financial failure if left too long.

Administered by the Chartered Institute of Credit Management, the Prompt Payment Code sets standards for payment practices and best practice, allowing suppliers to raise a challenge if they feel they are not being treated fairly by a customer. By signing up to the Code, businesses send out a strong message to the marketplace that they are dedicated to maintaining fairness in the supply chain by paying customers on time. Business owners can also look for such credentials when forming new partnerships.

Regardless of the size of their client portfolio, owner-managers who fail to make efficient and effective credit management part of the day-to-day running of the business may find themselves struggling to maintain a healthy cash flow. By implementing best practice in this area, they can guard against late payment, strengthen their cash position and minimise the risk of insolvency in the year ahead.


Bethan Evans is an Insolvency Partner at accountancy firm Menzies LLP.

By Debbie Rose, General Manager at Universal Card

When this subject is raised especially in today’s economic environment, the answer sways to the yes vote and the obvious; invoicing early and chasing payment should help keep cash flow healthy. Cash flow being king.

Let’s just break this down a little more, as its never that simple, is it?


Financial controls are put into place to track performance and evaluate progress toward the financial goals of the company. Management helps decide how to arrive at those goals; how many people are needed to do this, what salary to pay.

Businesses make decisions in uncertain environments and develop strategies to approach the uncertainties in a structured way. Once these decisions have determined how the company will proceed, financial controls evaluate how well the company is following the strategic plans and how valid the strategic decisions were in the first place. You may be more familiar with three year / five year planning which some organisations build into their business planning and actually spend two to three months to create. This may lead to change and reorganisation which in itself can impact financially, or personally.

Ensuring the right financial controls are in place from the outset allows the organisation to evaluate, in a continually objective and systematic manner, ensuring the daily books balance, for a stable work environment and allowing for a healthy outlook for R&D.

But debt isn’t necessarily down to the business to manage or indeed necessarily totally in its control. Let me explain.

Debt hinders consumer spending, consumer spending hinders businesses! Money is the lifeblood of a business and finance is the nerve centre.

There are three key areas to address in tackling debt:

Thus, as mentioned earlier - cash is king and having it come into the business at the right time can be make or break.

It’s worth spending a moment to think about the whole cash cycle though, from taking an order to getting paid, and make this as short as possible, because a long cash cycle is expensive. It is important to have a negative cash cycle if possible, which means taking cash from customers upfront. Dell used this concept and moved from a 19-day cash cycle to a negative one, which meant that as it got bigger, it had an increased amount of free cash.

Additionally, given the world of business is mainly conducted by people, in the workplace, employees’ own financial situation plays a massive role in their ability to deliver.

Basic needs must be met or exceeded before an employee can even think of what is next in terms of performance and achievement. The basic needs being paying their mortgage/rent/having a roof over their head, and having food to eat. Without our basic needs being sorted, we can’t even think about doing the rest – the niceties. If our company isn’t making even a small profit then, there is no way we can start investing in the development of a new product. And if we don’t understand our income and outgoings, we won’t be able to handle borrowing money against a repayment plan.

But surprisingly, many young adults step out into the big wide world totally unequipped to deal with the financial burdens they may encounter.

In August 2016, the Money Advice Trust published a report called ‘Borrowed Years’ in which they stated that young people were frequent users of credit cards, overdrafts, and loans from friends and family. Among their findings were:

Adults financial habits can be established as early as seven years old, therefore financial education needs to start early, and where it isn’t, the employer can look to help bridge this gap for the wellbeing of their employee, and in turn the company and therefore is ability to service its customers.

We live in an age of credit availability, contactless payments, PayPal, balance transfers, interest rates, and who knows what the next round of technology may bring – retina payments perhaps? It’s normal to accumulate debt in your 20s and early 30s because at this age, individuals are ‘expected’ to be renting a property, running a car or paying expensive commuting costs, or alternatively travelling the world, having the latest technologies – this is the ‘do it all’ generation after all. Interestingly millennials may be the first generation to earn less than their parents, with future generations likely to follow suit.

Pre-paid cards are a great way to help. You can only spend the money you put on it, so there’s no way of going overdrawn or running up a debt. It’s like a pay-as-you-go mobile phone - you top it up with money in advance. You use it like any other payment card, in shops or online. Businesses can help employee wellbeing by helping them realise what is critical spend (mortgage/rent) and pay this into their bank account, vs essential spend (food/heating) which can be paid via a prepaid card and once it’s gone, its gone.

Last but not least, market conditions can easily affect your business, and therefore you must always be aware of :

All in all, yes, debt does of course hinder business functions because without cash flow, the stresses tag at many seams within the organisations. And don’t look at debt in isolation as it’s never as simple as that. We are living in an ever-changing world where technological changes partnered with a generation that aren’t necessarily following in their forefathers footsteps, where divorce rates are up 5.8% since 2015, pay growth is subdued and inflation rises to 3.1% adding to the UK squeeze on cost of living. Businesses can do a lot to help manage debt by thinking broader and utilising the tools, advice and technology to support them.



For many businesses, dealing with late or non-paying customers is just part of the course. However, when businesses are finding their feet, or growing quickly, the time and effort required to chase payments can be extremely frustrating and costly.

To tackle the problem of bad debt, businesses need to stay alert and spot signs that a customer contract could be becoming a problem. If a key customer normally pays its invoices on time after 60 or 90 days but payments have recently started to slip – this could be a sign that they are experiencing cash-flow difficulties. Another indicator could be if the customer requests a breakdown of the invoice or a purchase order number. While such requests may of course be entirely justified they could also be symptomatic of financial problems.

For growing businesses, it is especially important to check the credentials of key customers carefully at the outset and monitor the relationship as it develops. They should also keep a close eye on media reports as these could provide advance notice that a customer is heading for business failure. Being forewarned gives the business time to mitigate any financial risks.

It is not unusual for businesses with shorter trading histories to lack the skills and resources to handle debt management issues in house. They may also believe that external debt recovery services are too expensive, when in actual fact most specialist firms operate on a fixed-fee basis; according to the costs that the courts would allow them to recover. As well as helping to recover bad debt more quickly, early intervention can help to prevent the situation from spiraling into a more costly legal dispute.

When selecting a firm to provide debt recovery services, businesses should make sure it has the breadth of capabilities to see the matter through to its conclusion. Some debt recovery agencies are unable to issue county court proceedings, for example, and this can lead to unnecessary delays.

Putting in place clear contractual terms and conditions at the start of a new supply relationship can also help to reduce the risk of bad debt arising. If the business is supplying ‘goods’, for example, it should consider using a retention title clause to ensure that the customer cannot claim the goods as their own until they have for them paid in full. If the customer fails to pay on time, the supplier would be within their rights to take back the goods and sell them to another company.

When dealing with key customers, small and medium-sized businesses can be understandably reluctant to put pressure on them to make payments in a more timely way. There may be a perception that the trading relationship is a valuable one, when in fact hidden financial costs are eroding any profit.  In some instances, the customer may put pressure on their supplier to accept longer payment terms or demand discounts. Such behaviour could be a sign that the customer is struggling financially and may have been refused credit elsewhere.

In order to prevent bad debt issues escalating, businesses should make sure they have efficient systems in place. If the customer has signed up to 30-day payment terms, the supplier’s credit manager should ring them promptly if this date has passed. After 45 days, the business should be sending final demands to the customer and if no payment is made by 60 days, a solicitor should be instructed to issue county court proceedings. Making it clear that the business has a strict policy in place to tackle late payment of undisputed invoices can help to lessen the risk of bad debt arising and staying in touch with late payers can sometimes shed light on the extent of the customer’s financial difficulties.

For businesses trading overseas it can obviously be more difficult to recover assets. In such cases, it is usually necessary to use the customer’s local court system and enforcement measures but this can take time and, in some cases, systems may lack the transparency of their UK equivalents. To avoid costly delays, it is important for businesses to obtain the right information about the customer from the start; making sure it knows exactly where any factories and warehouses are located.

It can be tempting for small businesses to cut corners when it comes to debt management but this can make matters worse. When chasing payment, it is important to follow debt management protocols. However, sometimes managers overlook such matters, which can make it harder for them to recover bad debt through the county court system. To avoid this, businesses should seek professional advice before proceeding. Having access to good quality advice could also prevent the business from doggedly pursuing a claim that it has little chance of winning or where it would be unlikely to recover its full value.

In most cases, for claims of less than £10,000, it is possible to make use of the small claims court system. Using this system, businesses can claim back court fees and a set amount allowed for issuing the claim, but they are unlikely to recover the full value of the claim. Depending on the values involved, businesses may need to be prepared to write off some or part of the claim or else try to settle the claim out of court.

For businesses focused on growth, it is important to establish the right policies and procedures from the start and this should help to streamline debt management. Using specialist debt recovery services can help the business to manage debt more efficiently, while freeing up managers to focus on what they do best; creating new trading relationships and winning new business.

Alan Hamblett is a partner and debt recovery specialist at Shakespeare Martineau.

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