September 2016 Credit Management magazine

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CMNEWS A round-up of news stories from the world of consumer and commercial credit. By Sean Feast and Alex Simmons ADVICE SECTOR AGREES ON NEW STANDARD STATEMENT THE new Standard Financial Statement (SFS) will go live on 1st March 2017, marking the beginning of a transition period during which creditors and debt advice providers will move to using the new format. The news, announced by the Money Advice Service (MAS) last month, will be the first time that major debt advice providers, creditors, and other debt bodies will use the same format to assess income and expenditure for over-indebted people, bringing greater consistency to the way finances are considered in debt advice. The SFS provides a single set of income and expenditure categories with spending guidelines which will be used across the sector, in a single format. A savings category will also be included to help people build financial resilience while repaying their debts. This important addition is intended to help people in debt to withstand unexpected costs and give them a solid financial footing once they are debt free. Sheila Wheeler, Director of UK Debt Advice at the Money Advice Service, describes the SFS as a major landmark in bringing consistency to the way organisations consider the budgets of over-indebted people: “Consistency when assessing income and expenditure is critical and this single framework will have benefits for debt advisers, clients and creditors alike,” she says. “The SFS has been developed in partnership with key organisations across the debt advice and creditor sectors. Their continued support will be vital as we call on all debt advice providers and creditor organisations including Government, Local Authorities and utilities to use the SFS.” The increased consistency provided by the SFS will help debt advisers and creditors in a number of ways. Currently, there are different formats and spending guidelines in use. The SFS will bring greater consistency in the way affordability assessments when considering repayments are recorded and considered. MAS claims that debt advisers and creditors will also be able to pass people’s details more smoothly between different agencies, reducing the number of times affordability assessments are completed and making the journey through debt advice more straightforward. The development of the SFS has been co-ordinated by MAS which has brought the debt sector together to form the SFS governance group. This group represents key organisations including major advice providers, creditors, trade associations and insolvency agencies. One such organization, the Credit Services Association, welcomed “This new mechanism will help remove some ambiguity, and allow a more consistent and transparent approach across the industry. Personally, I would also like every single creditor, including Local Authorities and Government departments, to use SFS.” the new Statement, suggesting that it will help create a clearer picture of an individual’s financial position and enable a fairer, faster resolution for customer debts. It also gave a cautionary welcome to the new mechanism that allows customers to save a proportion of their monthly disposable income and effectively ‘ring-fence’ up to £20 per month to save for emergencies. Leigh Berkley, President of the CSA, says that previously it has been up to individual firms to determine how much of a customer’s disposable income it is fair and reasonable to collect: “This new mechanism will help remove some ambiguity, and allow a more consistent and transparent approach across the industry,” he says. “Personally, I would also like every single creditor, including Local Authorities and Government departments, to use SFS.” The Money Advice Service will continue to work with the governance group over the coming months to monitor the roll-out of the tool and to extend the reach of the programme beyond the financial services sector. More information can be found on the SFS Website at: sfs.moneyadviceservice. org.uk. moneyadviceservice.org.uk 6 September 2016 www.cicm.com The recognised standard
CICM NEWS BUSINESS FINANCE GUIDE ON TRACK TO HELP MORE THAN ONE MILLION BUSINESSES PHILIP King, Chief Executive of the Chartered Institute of Credit Management, recently attended the formal launch of the new Business Finance Guide, a reference source for funding devised by the ICAEW and the British Business Bank, and with input from the CICM and 22 other business organisations. The Guide, which also benefited from input from Credit Management’s Managing Editor Sean Feast, is described by Philip as essential reading not only for those just starting out in business, but also established organisations who are looking to grow and explore the options available to them. “The CICM is once again delighted to have played a part with other leading business organisations in creating the guide,” Philip says, “and in helping to make sure more businesses understand the diversity of financial support, sometimes from within, that is available to them to succeed in an increasingly competitive commercial environment.” british-business-bank.co.uk SMEs HIT DISPROPORTIONATELY BY PAYMENT DELAYS SMALL businesses are now waiting over six weeks longer than big businesses for invoices to be paid, placing huge pressure on their cashflow and capacity to expand order books. Figures from the ABFA suggest that small businesses (with a turnover less than £1 million), now wait 33 days longer than large companies (with a turnover greater than £500 million) for payment, up from 31 days last year, representing a rise of six percent. The ABFA says that the largest companies now experience an average payment delay of just 38 days- which is one day quicker than last year. The smallest companies meanwhile, now wait an average of 71 days, one day slower than last year. Overall the average time a UK business has to wait for payment currently sits at 61 days. Jeff Longhurst, Chief Executive of the ABFA, says the impact of delayed payment on businesses’ cashflow and capacity to expand order books presents a serious concern particularly for smaller companies: “Even when a business is thriving, just a few unpaid invoices can end up a real threat to survival. “There are concerns that big business will start hoarding cash as a response to the Brexit vote. One of the ways they normally do this is by delaying payments to suppliers.” Meanwhile the amount of finance advanced to the UK’s smallest businesses through invoice finance jumped by over 60 percent in the last year, reaching £711 million up from £435 million the previous year. The figures from the ABFA appear to support the Association’s claim of the growing popularity of invoice finance amongst businesses of all sizes, but particularly SMEs. The ABFA claims that the amount of finance advanced to the UK’s smaller businesses is the highest year on year boost since the recession, as businesses increasingly shift away from more ‘traditional’ types of finance and turn to invoice finance to help finance their business growth. Smaller businesses using invoice finance received an average of £52,000 in invoice finance in Q1 of 2016, up over 60 percent from an average of £32,000 in the same period the previous year, to help them grow and develop their businesses. abfa.org.uk “Even when a business is thriving, just a few unpaid invoices can end up a real threat to survival.’’ UPWARD TREND IN PERSONAL INSOLVENCIES THE Insolvency Service has published insolvency statistics from April to June 2016, which show that total individual insolvencies increased for the fourth consecutive quarter. Jane Tully, Director of External Affairs of the Money Advice Trust, believes the upward trend in personal insolvencies will continue: “While some of this rise is driven by wider access to Debt Relief Orders – with more people with relatively low debts, low incomes and few assets now getting the welcome help they need – the underlying rise in individual voluntary arrangements (IVAs) is beginning to look significant. “Looking further into the future, we may also begin to see the added effects of the huge growth in consumer credit that we are now seeing. While most households are able to handle this extra borrowing, we are concerned that a minority are using credit to make ends meet, in an unsustainable way.” gov.uk/the-insolvency-service The recognised standard www.cicm.com September 2016 7
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Page 25 and 26: Larry Coltman FCICM Kim Delaney MCI
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September 2016 Credit Management magazine

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