Credit Management APRIL 2019

NEWS
IN BRIEF
Big banks join forces
LLOYDS Banking Group, Royal Bank of
Scotland and Barclays have opened the
first jointly-run business banking hub
in Birmingham in response to concerns
about branch closures and rising costs. The
scheme will see six business banking hubs
being piloted across the country, and will
allow businesses to pay in large volumes of
coins, notes and cheques and complete cash
exchange transactions. The hubs will also
have extended opening hours from 08:00 to
20:00, seven days a week.
Accounting error
KIER Group has announced that its debt was
higher at the end of last year than previously
indicated, despite efforts to reduce it, with
shares falling as a result by as much as 16
percent. The firm’s net debt position for the
end of 2018 was adjusted from £130 million to
£180.5 million, as a result of hedging activities
and a reclassification of debt associated with
assets held for resale. Liberum analyst Joe
Brent said the company’s situation was the
result of an “accounting error’’, which led to
the "restatement of £40 million of net debt
from assets held-for resale to underlying net
debt.’’ kier.co.uk
Law maker
LAW firm DWF has listed on the main market
of the London Stock Exchange with a market
valuation of £366 million. Sir Nigel Knowles,
DWF Chairman, received shares worth £3.3
million, while its 243 partners will share £232
million of shares equivalent to 63.5 percent of
the business. dwf.law
New government body
THE Financial Reporting Council is to be
scrapped and replaced by a new regulator
for accountancy firms, the UK government
has announced. The Audit, Reporting and
Governance Authority will have enhanced
powers and be able to make direct changes to
accounts, instead of applying to court.
frc.org.uk
Growing nest
STARLING is to open a new office in
Southampton by the summer. The move
comes after the digital bank won a £100
million grant aimed at boosting competition
in the business banking sector.
starlingbank.com
Apology
IN the supplement of the March issue of Credit
Management (page 42), we credited the wrong
company with having sponsored the Legal
Team of the Year Award at the recent CICM
Awards. Our generous sponsor was, in fact,
Court Enforcement Services, and we extend
our unreserved apologies to them for our error.
Smaller customers present
greater risk in payment cycle
LARGE companies continue to
pay late, but do pay their invoices
eventually, whereas smaller buyers
often present a greater risk.
This was one of the principal take-outs
from an excellent presentation from Dun &
Bradstreet’s Markus Kuger, Lead Economist
and Country Risk Analyst, at a recent
meeting of the Thames Valley Branch of the
CICM.
In a highly informative and broadsweeping
discussion, Markus said that
while big businesses are those most in the
firing line for their payment behaviour,
suppliers into larger businesses will get paid
eventually, whereas a smaller customer
that is paying late is more likely not to
pay at all. Of all of the sectors he explored,
the Government is the slowest payer;
agriculture is the best.
Speaking positively about the current
UK economy, Markus revealed that
unemployment is at its lowest level
since the 1970s and wages are growing
robustly. Some three quarters (75 percent)
of companies report difficulties in hiring
new staff, an issue that especially affects
those in manufacturing. The challenges, he
said, are not unique to the UK; many other
countries across Europe are experiencing
similar issues.
On the downside, however, Markus
warned that the UK economy is slowing,
and that 2018 growth was the slowest for
a decade. Again, however, he highlighted
that this was not unique to the UK. He
also stated that the slowdown had begun
before the word Brexit had even entered
our vocabulary. While there was good news
Digital roadmap will lead
to greater productivity
A research report has laid out a digital
roadmap that could catalyse up to a £57
billion productivity payout for UK SMEs over
five years.
It is claimed that Making Tax Digital (MTD),
the digitisation of VAT in April 2019, will
immediately catalyse an annual benefit of
£6.9 billion, or £46 billion over five years in
net gains in turnover and growth for the UK
economy. If all SMEs in Professional Services
were catalysed by MTD, the sector would see
an annual benefit of £1.1 billion.
These are the major findings of The
Productivity Payout: UK Small Businesses
and the Digital Economy – a research report
and first of its kind economic model released
by Volterra Partners association with Intuit
QuickBooks. This new economic model
– built on predicted behaviours of small
business owners as a result of social and
financial drivers – demonstrates that once
businesses integrate technology to become
around consumer spending, companies
had short arms and deep pockets, and were
adopting a ‘wait and see’ approach when it
came to investing.
“All of the indicators regarding economic
health are deteriorating,” he said, “but this
is a pan-European trend. While companies
are still more optimistic than pessimistic
(according to barometers such as the
Purchasers Managers’ Index), the indices
are dangerously close to negative, and the
Macroeconomic picture is deteriorating.”
Philip King FCICM, Chief Executive of the
Chartered Institute of Credit Management,
said that Markus’ comments around
payment behaviour were particularly
interesting: “They bear out something
that we have often said, that certainty
of payment is often just as important as
whether you are paid in 30 or 60 days, as
it allows you to manage your cashflow
accordingly.
“Whereas big companies are often the
ones castigated in the media for hanging on
to their cash for longer – which some might
say is good credit management on their part
– they are still invariably a safer bet than
doing business with a smaller customer.”
dnb.co.uk
All of the indicators
regarding economic
health are deteriorating,
but this is a pan-European
trend.
MTD compliant, a ‘digital snowball’ effect is
likely to occur as they experience so-called
spill-over benefits.
These spill-over benefits will drive
increases in SMEs’ levels of productivity, for
example by better enabling better cashflow
and human resources management, and
freeing time for more productive activities
such as sales, marketing or training. Having
adopted one form of digital technology,
businesses tend to adopt others, in turn
saving more time and reaping the rewards
from cumulative productivity benefits from
digital interoperability.
Despite the huge gains to be made from
the adoption of digitisation of traditional
business practices, one in seven SMEs in
Professional Services are still unaware of
MTD and its associated impact.
gov.uk/government/publications/makingtax-digital/overview-of-making-tax-digital
The Recognised Standard / www.cicm.com / April 2019 / PAGE 8