Vigilence is still required
Stephen Duffety, managing partner of Baker Tilly's East Anglia office, explains how research by the firm shows late payments doubling and fraud concerns increasingTHE number of companies suffering late payment from customers has more than doubled in the last six months according to data from the latest Baker Tilly Finance Director Survey.
Stephen Duffety, managing partner of Baker Tilly's East Anglia office, explains how research by the firm shows late payments doubling and fraud concerns increasing
THE number of companies suffering late payment from customers has more than doubled in the last six months according to data from the latest Baker Tilly Finance Director Survey.
This twice-yearly research initiative shows that 41% of the 100 finance directors questioned nationwide have reported a problem with late payment, more than double the 19% who reported this as an issue in the previous survey in March.
Increasingly, businesses in East Anglia are having to fund their working capital through stretching credit terms with their suppliers as they can't rely on invoices being paid on time. This creates a chain reaction throughout the economy.
However, the stark reality is that elastic can only be stretched so far before it snaps and we will see more local companies go under as pressure on working capital increases.
The survey also reveals that businesses face significant challenges before the economy recovers. Significantly:
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n 54% of respondents expect no improvement at all in trading conditions for their business over the next 12 months;
n 28% expect trading conditions to worsen throughout 2010;
n 60% of firms have made redundancies in the 12 months to September 2009 compared with 42% in the 12 months to March;
n 57% of finance directors are concerned about an increased risk of criminal fraud impacting their business as a direct result of the recession.
Interestingly, lack of bank credit is no longer seen as the primary factor adversely affecting business performance. Lack of consumer confidence is seen as more significant (35% against 29%).
Reduced concern about the availability of bank credit could be interpreted as a positive sign of an easing of credit conditions here in the region. However, as evidenced by the pressure on supplier payments, I suspect it more reflects businesses simply getting used to tough conditions and moving on. Some entrepreneurs have given up on their bankers and are finding another way.
Despite these major concerns, however, the survey also reveals some optimism amongst the respondents:
n A third (33%) expect an increase in like for like sales over the next six months (albeit against a poor comparative period), compared with only 20% in the previous survey in March
n Many finance directors see opportunities for growth citing development of new products and technologies (39%) and expansion into new geographic markets (24%) as the key drivers
Despite some positive signs of a slow recovery in East Anglia, times will remain tough for businesses over the next year and finance directors need to remain ever-vigilant and keep control over costs and management of working capital.
For further information on the above and other accountancy and business advisory issues, please do contact us at Baker Tilly's East Anglia office on 01284 763311 or by e-mail at firstname.lastname@example.org.