‘Simplicity’ is designed to bring peace of mind within minutes to small firms struggling with poor paying customers. It offers simple pricing, simple administration and a simple and fast claims process on all debts over £200 so that if a payment remains outstanding, the potential impact on a company’s cashflow is minimised.
Launched by Euler Hermes in the UK and Ireland after extensive market research and a successful roll-out of a similar product in Belgium and The Netherlands, Simplicity is the first product of its kind to specifically address the needs of small businesses by removing the need for credit limits.
Businesses are covered in the event of non-payment or insolvency of their customer for a minimum of 60 percent of the unpaid debt value to an agreed maximum limit* as standard. This can be increased to 90 percent with a higher maximum if the policyholder applies for a Euler Hermes ‘grade’, (via Euler Hermes’ online platform) and their customer is assessed as an acceptable risk.
“Simplicity directly addresses the needs of the small business community,” said Lukas Neckermann, commercial director of Euler Hermes. “Traditionally credit insurers have focused mainly on developing products to meet the needs of medium and larger sized enterprises. It was time to create solutions specifically tailored to the small business sector.
“Small businesses recognise the benefit of protecting their business against the risk of not getting paid, but existing credit insurance policies have been seen as being too costly, confusing and impractical for a business with little by way of credit management support. With Simplicity Euler Hermes has created an ‘out of the box’ product that requires no more administration than a motor or home contents policy, but that provides a level of protection that will help business owners sleep more comfortably at night.”
With thousands of businesses already adversely affected by recent bad weather and flooding, new research released by RSA has revealed that small and medium-sized retailers are dangerously unprepared for interruptions to their Christmas trading period.
Following subdued summer sales, and despite almost a third (31 per cent) of those surveyed saying they are relying on Christmas to boost their annual takings, nearly half (47 per cent) of respondents admitted they are not prepared to deal with interruptions to Christmas trading. In fact, only 14 per cent feel more prepared this year than last year for business interruption, and almost one in four say they have no business continuity plan in place at all.
At the same time, small retailers appear more vulnerable to business continuity threats this year than last year, as a result of cost-cutting during what remains a tough trading climate. A fifth (20 per cent) of the retailers surveyed say they have consolidated suppliers to cut costs this year, with a third (31 per cent) admitting to relying on just one or two key contractors. Around half of retailers are also concerned about supplier deliveries (46 per cent) – likely as a result of their increased overreliance on just a handful of suppliers.
Tara Kneafsey, RSA’s SME director, commented: “SMEs in the retail sector have been planning all year for a Christmas sales boost, and many are reliant on it for survival, but failing to prepare for business interruption could quickly undo all their hard work. Perhaps unsurprisingly, two thirds of respondents tell us they are worried about the weather affecting their business this Christmas, but regardless of this are failing to protect their livelihood through robust planning.
“Adverse weather can bring businesses to a halt, with damaged property or stock leaving it unable to function, so crossing your fingers and hoping for the best is just not enough. The importance of putting in place practical preventative measures should therefore not be underestimated – for instance, an up-to-date business continuity plan can make or break your business in times of crisis.”
A quarter (24 per cent) of respondents admit they have not reviewed their business continuity plans at all this year – meaning these are likely to working from outdated plans, and that stock or equipment may be under-insured. Planning for the worst doesn’t need to be complex, though, and should match the specific needs of the business. These six simple steps can help ensure you have a workable ‘plan B’ should the worst happen:
- Identify the key elements of the business. What are the critical processes and functions? Who are your key suppliers, customers, personnel? Do you have specific equipment or machinery that you can’t function without? What are your most profitable products or services?
- Develop an impact analysis to determine how critical some of these core elements to your business are. For example, can your e-commerce business cope if your high street store is shut? Are you in a position to quickly hire temporary staff in the event of several people falling ill at the same time? Consider seasonal as well as more general business needs, such as higher stock levels needed in key trading periods.
- Use this insight to develop your own business continuity plan. This should be divided into two parts; crisis management planning and recovery planning.
- Your crisis management plan should include evacuation procedures, crucial information for the emergency services (e.g. site layout, location of hazardous substances), a list of essential contacts (e.g. suppliers, utility companies) and a pre-agreed communications path for keeping key stakeholders updated (e.g. staff, suppliers, financiers).
- Your recovery plan should cover pre-planning of the resources available to your company in case of business interruption. This might include holding lists of temporary office or manufacturing space, a reciprocal agreement with another business to use their premises in case of emergency, or details of a third party supplier who can meet the needs of your customers on your behalf.
- Once a Business Continuity Plan is in place, make sure you keep it up to date. Review it regularly – for example, are the emergency contact details listed still accurate, do you still work with the tradesmen you have on your list, or are there new ones to be added? Don’t forget to keep a copy off-site, too.
With the economic climate still proving tough and the business climate more and more competitive, small business owners are feeling the pinch now more than ever. In a recent study by AXA, business owners were asked what they thought were the biggest risks facing their business. They cited a multitude of key risks, demonstrating the range of difficulties that have to be navigated by startups.
Nearly half of the respondents (48 per cent) cited theft as a risk, while more than one in ten said it was the main risk facing their business. Despite the government’s recent efforts to boost lending, cash flow remains the most common stumbling block for startups, with 40 per cent of respondents citing it as a top-ranking risk and one in seven highlighting it as the main risk facing their business. 40 per cent of respondents also identified accidental damage and being sued by a client or customer as other top-ranking risks.
Experian Business Check enables SMEs to access accurate and up-to-date information on the financial health and payment performance of other UK businesses, including limited and non-limited business. It will help businesses to minimise the risk of non-payment, late-payment, commercial identity fraud and exposure to the failure of key customers and suppliers.
Individual checks can be purchased from £13.99.
SMEs using the service can check details of company directors, enabling them to identify disqualified directors. They can also set up instant text or email alerts so that they can be alerted, whenever and wherever they are, to changes in the financial or management status of those businesses monitored.
Max Firth, managing director of Experian’s Business Information Services, commented: “More than 20,000 firms go out of business every year in the UK, leaving a trail of unpaid bills and out-of-pocket creditors. Furthermore, many firms are facing late payment issues, where the average time taken to settle bills is now almost 26 days beyond agreed terms. As a result, many smaller businesses encounter cash-flow problems that can even lead to their own failure.
“Experian’s commercial credit information is relied on by many big companies to minimise commercial credit risk and to enable them to make better, more informed customer decisions. Experian Business Check provides these capabilities in a convenient and affordable manner, so that SMEs can also use high-end business intelligence to limit financial exposure and improve cash-flow.”
Experian Business Check, which provides SMEs with a single score to highlight likely failure rates and payment performance, draws on data from Companies House, Registry Trust Limited, and access to information from Yell and Thomson – the two largest suppliers of non-limited business information. It also includes payment performance data from more than 22 million business-to-business transactions made every month. This information is already used by many of the UK’s largest businesses and commercial lenders to accurately understand commercial credit risk.
As an introductory offer, Experian is giving SMEs a 50 per cent discount on their first Business Check order. To receive the discount, SMEs must type in the code 50% when prompted.
Business Minister Mark Prisk announced a new working group of business representatives would examine issues behind late payment, while the Association of Chartered Certified Accountants (ACCA) published a new guide on prompt payment.
Prompt payment is vital for small and medium-sized enterprises (SMEs), with many firms not able to survive the cashflow problems that late payments create. Advice and guidance for small businesses to help them make sure they are paid on time and can seek redress if they are not is part of the Finance Fitness campaign, which sees government and businesses working together to help SMEs.
The Government is encouraging SMEs to:
- Proactively agree payment terms before delivering orders.
- Sign-up to the Government’s Prompt Payment Code, run by the Institute for Credit Management (ICM) and representing an estimated 60 per cent of supply chain value in the UK.
- Raise complaints over late payment from Code signatories and use legislation already in place to help companies pursue late payers.
- Use electronic invoicing where possible, automating process and adding instant transfer of the invoice and instant verification from the customer that the invoice has been received.
Get Paid!, a new guide for small businesses which contains tips and advice from both suppliers and customers, has today been published by the Association of Chartered Certified Accountants (ACCA). It contains valuable lessons from small businesses such as advice on invoicing and developing a well-defined credit policy.
Business and Enterprise Minister Mark Prisk said: “It is hugely important that all businesses, particularly small firms, establish clear payment terms to ensure they get paid on time and successfully manage their cashflow.
“There is practical information available for businesses on getting paid that we are promoting to small firms through our Finance Fitness campaign, and this new guide published by the ACCA contains clear, helpful advice. I want small businesses to use this information and set up appropriate payment terms.
“The Government is already setting a strong example by paying 80 per cent of invoices within five days and the Prompt Payment Code is encouraging best practice. What’s more, we have secured the agreement of business representative bodies to come together and establish a prompt payment workshop, to explore these issues more fully and develop business-led solutions. We must continue to promote prompt payment to ensure our small businesses can thrive and grow.”
Small firms can get more advice and information on securing prompt payment at BusinessLink.gov.uk and from the Cash Management guides developed by the Institute of Credit Management, in association with BIS.
Phil Orford, chief executive of Forum of Private Business, said: “I’m pleased to see getting paid on time being given the attention it merits as a vital aspect of small businesses’ cash flow management.
“We take this subject very seriously and the Forum of Private Business has issued a call to action on late payment issues – indeed, we offer our own Credit Control guide and debt management guidance – and it is important that we put these matters front and centre and ensure small and medium sized enterprises understand what measures they can take to prevent late payment issues arising, and dealing with them when they do.”