BFA Update January 2011

Welcome to Credit Assist’s Company Alert and News Update that will be sent out on a monthly basis to all BFA members.  The object of this newsletter is to ensure that you are all aware as quickly as possible if a customer is in financial difficulty and to update you on financial news and finance that may be of interest.

Credit Assist Ltd is a bespoke provider of Credit reports to all different industries worldwide, we supply not only the Footwear industry, but include Santander Bayer and Veolia Water Shared Services amongst our clients.

We provide instant reports on 4.9 million UK businesses, each containing the most accurate financial and credit assessment information with full coverage of Ltd, Non-Ltd, PLC, and LLP.

The substantial difference between us and most other agencies is that our information is updated daily and is not 10-22 months old. Current information on a company is vitally important when accessing credit risk as so much has changed in economy here and internationally that you have to be able to work with valid data.

The credit worthiness of UK companies has been affected by the far reaching global financial crisis, all sectors and all industries have seen dramatic changes in fortune.  As credit managers we have had to expand our knowledge of risk analysis by understanding in greater depth the mathematics and dissection of the algorithms used in calculating the financial risk of doing business.

The interesting attitude of analysts and Credit Managers towards County Court Judgements is a case in point. Generally, the larger the corporate debtor the more likely creditors will ignore any judgement, whereas a small company will usually be penalised severely through the reduced credit scores and recovery actions.

When accessing large corporate companies, judgements are generally viewed as irrelevant to the credit risk; as a reasonable conclusion might be that they reflect the exasperated credit manager who has been driven to seek legal redress because all other actions to obtain payment have been fruitless.

As a guide the following is taken into account when calculating the effect of the judgement.

* Value / Total amount of CCJ’s

* Number of CCJ’s

* Time since last judgement

This information is considered alongside the size of the business; additional financial resources are based on any available financial information and the experience of the directors.  Taking the current information gleaned from aged debtors ledgers in the UK/Eire large supermarkets currently have from 7 -50 million pounds being paid or outstanding beyond normal trading terms.

Whereas, for a small competitor store the impact of a county court judgement could be disproportionately more severe so does this bias expose us all to more risk?  The Government recently announced plans to name and shame companies that do not pay small business promptly, I doubt it will have the desired effect.

Change is in the wind for Credit Rating Agencies and their clients. To help with initial risk assessment companies require greater depth of information, a better knowledge of the company structure and more in depth reporting that includes more than year end accounts. Coupled with this a tougher regime of enforcement is needed for all creditors – if a CCJ is awarded then it should be enforced and a payment plan put in place by the courts. If companies realised that High Court Sheriffs would be enforcing collection, accounts would be paid on time, smaller businesses could thrive, and large corporate hopefully act more ethically.

Talking with information providers, the consensus is that the CCJ has to be in the region of £50,000 before it will even move the large rating score – why have we allowed this state of affairs to get so bad – apathy…  or total lack of ethics?

This Month’s Alerts

Paying 60 days, credit exposure limit down

Jan Kitchens

Account Director

Credit Assist Ltd

Tel: (01604) 217333

Mobile: 07530 890420

Fax: (01604) 889462

E-Mail: jan.kitchens@creditassist.co.uk

www.creditassist.co.uk