December 1999 - Small Business News

COMPANIES HOUSE

 

More Business As Usual

 

There was an increase of 8% per cent in the effective register at Companies House: a total of 1,281,100 companies were registered at the year end, exceeding last year's previous highest ever figure of 1,184,900.

 

The monthly compliance rates for filing accounts and annual returns remained high at 95% per cent and 94% per cent respectively. Offences of failing to file annual returns and accounts led to the conviction, in Great Britain, of 605 directors. "Companies in 1998-99" is available from The Stationery Office, ISBN 0-11-515468-X, price #19.95. Source Creditman 

 

CREDIT MANAGEMENT

 

The Top and Bizarre Excuses

 

The top 10 excuses for not paying

1. Waiting for the cheque to be signed 23%

2. Lost the invoice, send a copy 22%

3. Cash flow problems, waiting for debtors to pay us 16%

4. Account handler is off sick or is unavailable 15%

5. Cheque is in the post 6%

6. New computer system being installed or has failed 6%

7. Waiting for new cheque book or run of cheques 5%

8. Invoice in dispute 3%

9. We pay on 60/90 days, not 30 days 2%

10. You've missed the payment run 2%

The most bizarre excuses include:

 

" The cheque book has been destroyed in the flood"

"The owner's been buried with his cheque book"

"All names are put in a hat. If yours is pulled out you will get paid. If not, it will stay in the hat until next week"

"The director went for an operation and never returned, as he went off with the nurse"

"The tide is out and the director is unable to get in to pay cheques" 

"I do not speak English"

"I cannot make payment until the planets are aligned, which is only twice a year"

"We're in the middle of an armed robbery"

"Not now, it's the office party"       Source Alex Lawrie

 

INTERNET

 

Speed Trap Secrets

 

An interesting site for the business traveller amongst you is a site dedicated (and how) to speed traps. The site builder obviously knows their stuff about this subject, and therefore can dispel many myths. Worth a look, Speed Traps

 

E-MORI Poll

 

The latest MORI poll show's that nearly half of the UK population have access to a PC, and around 1 in 7 have bought on-line. 

 

46% overall have a PC either at home or at work

17.5 million have/use a PC at home

11.5 million use a PC at work or place of study

4 million adults in Britain have bought on-line

16 million people have a mobile phone

16% have satellite TV at home

15% have cable TV at home

8% have digital TV at home  E-Public

 

Source: Technology Tracker (2,000 interviews monthly)

 

Internet Interest, 2 i 4 Toys R Us

 

Another sign that the silly season has started is evident in the growth of traffic to toy shops. The latest traffic figures from MediaMetrix show that the top three online toy retailers, 

eToys.com, ToysRus.com and KBKids.com have all experienced growth patterns in excess of 100 percent in the last six weeks. ToysRus.com, it seems, cannot handle the heat and have even scaled back on advertising in a bid to curb traffic to their site. They have also put a limit on how many people can access the site at any one moment meaning that hundreds of potential customers will get turned away. While those customers may never return, the damage caused is infinitely less than that caused when customers are driven to distraction by Web delays and end up tossing their shopping carts.

 

TOPIC

 

Debtors and a Pound of Flesh

 

The issue that bothers creditors (the supplier) and unsuspecting customers most when a company ‘goes bust’ without paying their debts is how they still manage to maintain a good lifestyle, a quality car, holidays etc. In many debt recovery cases that I deal with, the creditor will give me a list of assets that the debtor possesses, and the creditor wants sold to pay off their debt. Of course, it seems natural that a failed businessperson should not end up in a better financial position than the creditor – but many do. Is this right or wrong? Do you believe that every failed business should also result in the personal assets of the owners of the company being sold to help pay you back? Should company owners have limited liability when they start a business? There are many more questions, lets look at who these failed business owners are. First, there are two types of debtor: 

 

1. Those who start a business based on a good idea (it does not have to be brilliant) and with what they believe to be sufficient capital (funding) to cover the start up period. They commence trading, they fail to hit the planned sales target, but they decide to continue as they believe they can make a go of it. A while later, they have no funds to continue with building the business. They decide to ask for credit from a few suppliers - some say, 'yes', some say, 'no'. About three months after taking credit, they cannot pay their suppliers or continue trading. The business has no assets. As the business was not a limited company, the suppliers take legal action against the proprietors (a husband and wife team, respectable and honest). They have to sell their house and move into their daughters house .... The rest is pretty much obvious, and not recommended.

 

2. A limited company is set up by two individuals. They are not new to business as they have had another ten companies (some still trade, others have been legally wound up, owing creditors money). The new company builds conservatories - a new experience for the owners. They take out a number of newspaper ads - using 'their' other companies as trade references to get credit approval for the expensive newspaper ads. The response to the ads is very good - as it should be as they offer a great product, at a good price and in time for summer. Deposits are taken from customers, some conservatories are even started (digging holes) and the business looks great: from the outside. 

 

After a while, no one can contact the company at their offices. No customers have a conservatory and everyone realises they have been duped. The company has been wound up by the government -unpaid taxes, or by a trade creditor. You as a customer, have no prospect of any refund. The Liquidator of the company finalises the end of the company - and in most cases that is the end of it. The business owners have improved their lifestyles through high wages and benefits - just as planned, but very hard to prove.

 

Conclusion

The first example comes from the biggest employer of people in the UK 'The Entrepreneur', he or she has to take risks, that is the nature of business. If you are a trader and the entrepreneur wants you to supply goods/services on credit, then you must do your job by properly credit vetting the customer, see www.ctoc.co.uk/cp_2-4.htm. As a customer you should ask lots of questions and seek finished examples of their work in your local area. I would, personally, not like to see this couple loose their house. But they did! 

 

The second example thrives on poor credit control, and a lack of a credit policy. As a customer, I would request details of satisfied customers to back up claims, and if the amount of money for the job is high, why not credit check the company - you do not need to be a trader to check a company's accounts and history: go to Creditman to get a company report. I would, personally, like the company owners barred from starting another company in the UK. But they have, more than once. 

 

If you traded with the above companies, it is unlikely that you would know of their personal backgrounds, and therefore you could not make a rational decision as to the likely hood that you were being swindled from the start. It is also more complicated if the company just stops trading - without being wound up - as their is no point of reference to gain more information. What you can do (using the list below) is contact the solicitor dealing with the winding up. Or, in a non-limited company case where the proprietor is about to be made bankrupt, contact your local Official Receiver (see Official Receivers), and in cases where the company ceases to trade you can still sue the company, and/or contact Companies House for information. If you call 0171 936 7328 you can ask whether a company has a current winding up petition.