Take a read of this Ask the Experts article by credit management expert Steve Savva, where Steve looks at the effects of optimising profit through effective credit management.
How to optimise profit through effective credit management – ask the expert
via How to optimise profit through effective credit management — Ormsby Street
We’ve all heard it before – ‘Cashflow is the lifeblood of any business” and it’s true, so we should do everything we can to ensure the money keeps coming, however we’re soon to be entering the season when a Christmas is going to get in the way.
Many businesses will shut down for the festive period, which means your customers won’t be paying any of their bills. In the meantime, you’ll need to be paying your employees 
holiday pay and not getting in any more new business as your team open presents and drink sherry, so cashflow becomes doubly important as you need to bring in the cash before the Christmas shutdown begins.
There are however a few simple things you can do in order to make this a pain free period:
Whether you’re a brand new small business or a more established SME, one of the main worries facing all business owners, has to be building up your credit score and avoiding getting into debt. Here’s a few tips to help you on your way…
1) Know your own credit score. It’s vitally important to be aware of how your company’s financials are reported when potential traders and customers are searching for you. If you don’t like the look of your credit score, are other people going to want to do business with you? If you’re looking for ways to improve your credit rating, take a look at our post on ‘how to get a better credit rating for your small business’
2) Be aware of your payment terms! Don’t get caught out by thinking you’ve got 6 weeks to pay a bill when it’s due in 4. This may count against you and other businesses could find out and not give you the credit terms you want, so keep on top of what’s due when.
3) On the flip side, when you’re investigating who to trade with, find out which company is likely to pay you on time. If they’re likely to renege on their payment terms, you can ensure you set shorter terms or limit the amount of credit you’re extending to that particular less-than-reliable company. Check out our ‘How can I tell if someone’s going to pay me on time’ blog for some more tips
It’s often bandied around at the moment, but the word ‘transparency’ is of huge significance when it comes to managing cash-flow, credit ratings and debt within any small business – so make sure you’re armed with all the tools you need and aren’t walking zombie-like into debt! Know your customers but most importantly, know your own business!
You can search over 7 million companies and register free by going to www.credithq.co.uk
Most small business owners get told that it doesn’t matter if they have a good idea or great service but what really matters is that they have an effective cash flow or else they won’t survive. And it’s true, cash flow is the lifeblood of any business, and as such we should do everything we can to ensure the flow keeps flowing. However we’re soon to be entering the season when folks disappear off to the seaside which means they aren’t signing off invoices. It’s holiday season!
Many businesses will have reduced staffing levels during the holiday period, which means your customers won’t be paying any of their bills. In the meantime, you’ll need to be paying your employees holiday pay and not getting in any more new business as your team also head off to get a tan.
There are however a few simple things you can do in order to make this a pain free period:
But don’t forget to take a break yourself! Everyone needs a holiday!
Back in February we set up a loan scheme with the international development agency Lend With Care in order to support the growth of businesses around the world.
Our loan was shared amongst four entrepreneurs in Vietnam and Cambodia and was used to purchase animals for rearing, obtain more land for farming, and set up a energy efficient plant for household gas.
So far 17% of our total loan has been paid back, and all of it on time, and no payments have been missed.
If only this schedule of payments could be met by all the other businesses we trade with.
In the UK the standard length of payment terms (i.e. the time a business has between when an invoice is raised and when it is due to be paid) is 30 days, however, the average time it takes a small business to get paid is 71 days!
This delay between expected and actual payment causes immense problems for business owners who need to pay salaries, replenish stock, or plan for growth. For those who can’t fund this cashflow gap through additional loans, overdrafts, or invoice financing face real survival dilemmas.
Some recent research we have undertaken with freelance workers has shown that they face the same problem and 36% of them have even turned to payday loans to overcome the problem.
But it doesn’t have to be like that. If farmers in Cambodia can make their payments on time, why can’t businesses in Canterbury, Colchester, and Cambridge?
At CreditHQ we believe that people should pay what’s due when it’s due, and that’s why our products tell you which businesses pay on time and which don’t, so our customers can make decisions on who they should trust their own livelihood with.
UK freelancers are increasingly struggling with late invoice payments, with around half admitting they have considered quitting life as a freelancer because of worries over continued late payment, and 46% stressing about having enough cash to live on.
Our latest research here at Ormsby Street, also reveals that one in ten freelancers have faced difficulties paying their mortgage or rent because of late invoice payment, and many have turned to family (37%) or even payday loans companies (36%) to cover a shortfall brought about by late payment.
While a fortunate 19% of respondents say most of their invoices are always paid on time, a freelancer’s invoices are paid on average 18 and a half days after their due date. At any one time, a freelancer in the UK is owed on average £5,431.03 in late payments and 79% of freelancers say that cash-flow is the number one concern for their business.
“Every freelancer knows that late invoice payment is one of the biggest frustrations, impacting cash-flow and causing much stress, from paying the mortgage to having enough money to live on,” said Martin Campbell, Managing Director, Ormsby Street. “For a freelancer to be owed more than £5,000 is clearly unacceptable and threatens the emerging freelance economy in the UK, which brings flexibility and work / life balance to so many.”
The Office for National Statistics revealed in 2015 that 4.55 million Britons are now their own boss and research by the Association of Independent Professionals and the Self-Employed (IPSE) found three in five businesses agree that it would be difficult to operate without hiring freelancers. The Ormsby Street survey of 1,002 freelancers and sole-traders, revealed that 40% of respondents have taken out a County Court Judgement (CCJ) in the last year to chase a bad debt, and more than half say that late invoice payment is getting worse not better.
It remains a problem for many freelancers when it comes to chasing clients over late payment, partly because they do not have the time to spare, but also because of fears this might impact future work with that company. 57% of respondents say they worry that if they chase for payment that client might not use their services again, while two-thirds say they feel uncomfortable and awkward chasing clients for late payment.
“Why should a freelancer waste their own billable hours chasing payment for work that has been successfully completed and is already due for payment,” continued Martin Campbell. “If customers are not willing to pay within the agreed terms then it’s time for freelancers to become more informed over whom they work with, and either ask for payment upfront or even choose to not work with company.”
With 49% of freelancers having had to turn down a contract because of concerns over a client’s ability / willingness to pay on time, we’re offering access to CreditHQ for the special freelancer rate of £12.50 for the standard subscription; allowing freelancers to obtain financial insight into every company they trade with. Sign up here to take advantage of this offer
“Freelancing has grown in popularity because of the choice and flexibility it gives people over their career, but its success relies on the prompt payment of invoices, which is not happening enough,” concluded Martin Campbell. “Credit-checking potential customers and partners is straightforward to do and should be done by a freelancer every time they work with someone, to protect themselves against late payment.”
About the research
An online survey of 1,003 freelancers and sole-traders was undertaken by TLF Research in March and April 2016.
CreditHQ, the credit-checking tool built by Ormsby Street, collates credit and trade information from Companies House, Experian and Dun & Bradstreet and presents that information in simple-to-understand credit and payment indicators, so a freelancer can assess which businesses are likely to pay them on time, or after 30 or more days.
Formed in 2014 to take over the operation of the financial data proposition of BCSG, Ormsby Street is developing the next generation of financial data services for small businesses. Its team of high-performing product innovators and software engineers are quietly taking sophisticated financial information and turning it into a next-generation digital tool to help businesses make good decisions about customers, suppliers and themselves.
German small businesses now able to use award-winning credit-checking tool, CreditHQ
CreditHQ is now available in Germany, as part of a new partnership with one of Germany’s biggest banks.
CreditHQ allows a small business to check the financial health and credit status of any customer or partner and will be available to the small business customers of its German partner bank. Its German launch is the next stage of an ambitious international expansion programme that will look to target Poland, the US, Australia and other European markets over the next 12 months.
More than 4 million German enterprises are classified as small and medium-sized enterprises, accounting for 99.6% of the total number of enterprises. German SMEs generated an annual turnover of approx. € 2,149 bn in 2012, which representing 35.3% of the total turnover of German enterprises.
“Despite new regulations brought in to combat late payment culture in July 2014, late payment remains a major issue for German small businesses, impacting on cash-flow and the ability to grow,” said Martin Campbell, MD, Ormsby Street. “There is a growing need in Germany for an easy way of checking the credit status and payment performance of customers and CreditHQ meets that requirement head-on. Partnering with a bank in Germany is a great way of bringing CreditHQ to the German market and we are confident it will mirror our success in the UK.”
CreditHQ is working with credit supplier, Burgel and will allow small businesses to check the credit status, payment performance and general financial health of millions of German small businesses. The simple traffic light ratings system shows clearly the level of risk associated with the company in question, and users are given two different ratings, one addressing credit risk and the other payment performance.
CreditHQ is used by more than 27,000 UK small businesses, and launched in Italy in 2015. Ormsby Street has just returned from the SXSW event in Austin, Texas, where it was representing UKTI as a UK Tech Ambassador and seeking new partnerships with US banks to further expansion into the US market.
“Late payment is a problem for small businesses all over the world and the next 12 months will see us launch in at least another four countries,” continued Martin Campbell. “It is impossible to force someone to pay on time, so small businesses have to protect themselves against late payment as best they can. CreditHQ’s use of big data to address that problem gives small businesses the insight and power to do just that, and is suited to almost any territory in the world.”
About Ormsby Street
CreditHQ is built by Ormsby Street, a Software-as-a-Service business based in Old Street, London. Formed in 2014 to take over the operation of the financial data proposition of BCSG, Ormsby Street is developing the next generation of financial data services for small businesses. Its team of high-performing product innovators and software engineers are quietly taking sophisticated financial information and turning it into a next-generation digital tool to help businesses make good decisions about customers, suppliers and themselves.
by
As this year’s football season reaches an end, here at CreditHQ we thought we’d take a look at how good the top football clubs are at performing where it matters – in the payments department!
Small businesses wait on average, 72 days for payment of invoices, and our analysis last year showed the average overdue invoice to a small business was worth a whopping £6,142.
The Payment Premier League was compiled by combining figures for payment performance and credit risk.
“If a small business wins a contract with their local football team then it is easy to let the heart rule the head, and just go ahead with the work regardless – people love the idea of working for the team they support,” said Martin Campbell. “But our analysis shows that just because a team is good on the pitch, it doesn’t necessarily follow that they will be as strong when it comes to paying invoices on time.”
“Winning a major contract with any sizeable local company is a big deal for a small business, but few would think to run a credit check. Yet the average time for a small business to be paid is 72 days, a period of time which could be seriously problematic for a small business if the figures involved were big enough.”
Sunderland and Crystal Palace were the worst performers on our payment premier league, so if you’re thinking of doing business with either of these teams, follow these simple tips to ensure you’re taking the right precautions to ensure you stay on top of your business cash-flow:
Check out who you’re doing business with at www.credithq.co.uk
Ormsby Street have been chosen as a finalist for this year’s Benzinga Awards – in the ‘leveling the playing field’ category
The Benzinga Awards (BZ), is a competition to showcase the companies with the most impressive technology, who are paving the future in financial services and capital markets.
Last year’s winners include HedgecoVest who were the overall winner, with Estimize taking first place for best startup.
If you’d like to join in the celebrations in New York on May 24th, click here for full information and details of how to grab your ticket.
Good luck to all the other finalists!
The long weekend might be over, but we’re extending our Easter special offer – Access CreditHQ FREE for one month!
Now we’ve hit the second quarter of the year, it’s a great chance to reflect on the first few months of the year and review the businesses with whom you’re trading.
Are your suppliers paying you on time? Might it be time to increase or reduce the amount of credit you’re extending to a particular business? Has your business’ credit and payment score improved and you’d like to show potential customers this?
CreditHQ can help improve your cash-flow and credit management, and ensure you’re working with the companies that are best for your business. If you know you want to work with a particular business but know in advance that they’re not likely to pay you until 45 days, you can plan accordingly and make sure you’ve got enough cash in the meantime for other purposes.
So this Easter, we’re offering you access to CreditHQ’s Standard subscription free of charge for one month! Simply enter the code EASTERHQ16 in the voucher code box*.
You’ll need to enter your card details, but don’t worry – we won’t charge you a penny for 30 days (and if you find you’re not using CreditHQ, simply cancel anytime within the first month to avoid the £25 monthly subscription fee).
So hop to www.credithq.co.uk and start checking out the best businesses you should be working with!
*voucher code valid until 30 April.
CreditHQ 