More British adults than ever before think Direct Debit is a good way to pay, according to research by Bacs Payment Schemes Limited. A massive 79% responded positively when asked what they thought of Direct Debit, illustrating how important this straightforward and convenient payment method is for Britain.

Direct Debit is widely accepted as the most cost effective method for businesses to collect regular payments from customers. With the number of adults responding positively to Direct Debit growing year-on-year (74% 2009) all organisations have the opportunity to convert large volumes of customers and realise the administrative and cost saving benefits.

Bacs research also shows that 63% of respondents prefer to pay their regular bills by Direct Debit rather than alternative options. Of those, 68% want to pay all their bills by Direct Debit unless there is no option to do so. Bacs figures also highlight that 1 in 4 Direct Debit payers are now using it more than 12 months previously, reinforcing Direct Debit’s growing popularity with consumers. In contrast with the 25% who now use Direct Debit more, just 6% of British adults say they are using Direct Debit less than they were 12 months ago.

The research also reveals that the greatest advocates of Direct Debit remain 25 – 44 year olds, with 71% preferring Direct Debit over other payment methods for regular household and personal bills, almost 10% higher than the national figure (63%). Based on these findings, if a business’ Direct Debit take-up within this group is lower than 71%, then there is strong potential for growth.

Mike Hutchinson, Head of Marketing for Bacs, said: “The high proportion of adults that are positive towards Direct Debit provides British businesses with a strong platform upon which they can build further sign-up with their customer base. To help businesses achieve higher take-up of Direct Debit, Bacs offers a wide range of marketing tools that businesses can use to create and enhance their sign-up campaigns.”

“Although Direct Debit is currently at its most popular, there will naturally be some that remain reluctant to change to Direct Debit. Bacs’ range of tools is particularly useful for those organisations that are looking to communicate with customers who have expressed a reluctance to use Direct Debit. A critical element of this is messaging, for example there is very little point talking about convenience when it holds very little meaning with the audience. Working in conjunction with Experian, Bacs has developed a tool that can help firms identify key messaging that would be most effective with a specific audience.”

If you would like discuss how our Debt Recovery/Debt Collection service can assist your business, please visit the ‘Debt Recovery/Debt Collection’ section on our website,  contact us on +44 (0) 151 515 3014 or email us.

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk)  and the full original article can be found by clicking here.

In his first major speech as Business Secretary, Vince Cable committed the government to taking a tougher line on parts of the banking system that have “not served enterprise in this country as well as they could”.

Addressing an audience at the Cass Business School in London, Mr Cable promised to “redouble our efforts to ensure that bank lending agreements from banks that have benefited from taxpayer subsidy are being honoured – especially for SMEs”.

He resisted arguments that there was little demand for business loans, pointing the finger of blame at the high cost of much business credit.

Mr Cable said: “If the bar is set too high, of course no one is willing to jump. The current risk aversion by banks in the SME sector will stifle recovery and, if it does, will actually rebound on the banks through bad debt.”

He set out three possible routes to improving the present squeeze on lending: separating retail and investment banking, resolving the question of a levy on the banks to reflect the fact the taxpayer is providing insurance, and ensuring that banks’ lending agreements are being kept.

In a broad ranging speech, Mr Cable touched on other areas where measures were needed to help business and to re-balance the economy away from too great a reliance on household demand and public sector spending.

As well as overhauling the business regulatory system, the government will look to create new apprenticeship schemes.

He committed himself to making the UK a “place where enterprise and innovation can succeed”.

Referring to the problems in the eurozone, Mr Cable conceded that while the “worst of the crisis” was over there was still a risk that difficulties could resurface.

He emphasised that growth would need to come from the business sector and trade, and pledged less regulation: “Often the most useful thing governments can do is simply to get out of the way.”

The Business Department wants to see closer ties between business and universities, and a greater focus on science and research.

It is likely, too, that the government will introduce a reform of the regional development agencies, switching extra support towards areas with the worst problems.

However, some business concerns have arisen, particularly over the future of a series of major project loans promised by the Labour government.

During business question time in Parliament, Mr Cable was pressed to commit the new government to supporting the loans.

But Mr Cable replied that “all projects are being reviewed” according to their affordability and value for money.

If you would like discuss how our Debt Recovery/Debt Collection service can assist your business, please visit the ‘Debt Recovery/Debt Collection’ section on our website,  contact us on +44 (0) 151 515 3014 or email us.

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk)  and the full original article can be found by clicking here.

Following calls from the Organisation for Economic Co-operation and Development (OECD) to raise interest rates to 3.5%, insolvency trade body R3 has traced the impact that rises would have on small businesses. According to a survey of 300 small businesses conducted this month:

* 7% of small businesses believe they are likely to become insolvent if the base rate rises to between 2 – 3.5%
* 12% of small businesses believe they are likely to become insolvent if the base rate rises to between 3.5 – 4%
* 18% of small businesses believe they are likely to become insolvent if the base rate rises to between 4 – 5% (it was over 5% in 2007).

R3 President, Steven Law commented on the findings:

“For businesses that are repaying bank loans and rely on consumer spend, an increase in interest rates would be a double blow. Pressure will be keenly felt among highly geared businesses, and an increase in the cost of finance either for working capital or to fund expansion are factors than can lead to corporate insolvency.”

The research shows that the hotel, catering and retail sectors are most likely to face insolvency in view of a rise in interest rates – about a third fear insolvency in any rise scenario. Small businesses in the construction and manufacturing industries are less likely to believe that they will become insolvent if interest rates increase.

By UK region, small businesses in the North West are the most likely to go into insolvency with increased interest rates, while the Midlands is the least likely.

Steven Law concluded: “Traditionally known as the manufacturing hub it is unsurprising that the Midlands region is less worried about a rates rise as their income comes from business-to-business spend rather than consumer spend. They often purchase plant on fixed term finance and will be in a better position than the highly geared businesses.

“Although increases in interest rates are likely to be gradual, we always advise any business owner who believes their company may be in financial difficulty to seek advice sooner rather than later.”

If you would like discuss how our Debt Recovery/Debt Collection service can assist your business, please visit the ‘Debt Recovery/Debt Collection’ section on our website,  contact us on +44 (0) 151 515 3014 or email us.

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk)  and the full original article can be found by clicking here.

Following the Office of National Statistic”s surprising announcement on 18 May that RPI inflation has increased to 5.3%, the highest level since July 1991, KPMG analysis reveals that companies are also allowing for much higher levels of inflation when considering their long term pension obligations on their balance sheets.

KPMG Pensions partner Mike Smedley said “Despite official messages that many of the inflationary effects are short term, our survey shows that many businesses are assuming higher rates of inflation will prevail for some time.”

According to KPMG”s Pensions Accounting Survey 2010, companies assumed an average long term inflation rate of 3.6% per annum at 31 December 2009, an increase of 0.6% over the previous year.

Mike Smedley said: “With the majority of occupational pension promises index-linked to some extent, this increase in expectations added around £100bn of liabilities to UK corporate balance sheets over 2009, with the issue showing no signs of receding in 2010.”

In fact at the end of the first quarter of 2010, the gilt markets were implying even higher long term inflation expectations than at the year end, but KPMG”s survey shows that over half of companies are mitigating the impact on their balance sheets to some extent since they believe market distortions are overegging the long term implied rate.

Salary growth expectations fall
KPMG”s survey also shows a slight reduction in average anticipated growth in pensionable pay.

Mike Smedley said “The reduction in future pensionable pay expectations clearly reflects changes seen in companies” remuneration and benefit strategies in the wake of the recession, such as capping pay for pension purposes. However, for most companies the real problem is legacy liabilities, and unless these can be mitigated, companies are at risk of having to dig even deeper into their pockets. Increasingly, companies are looking to reduce inflation exposure through offering members enhanced level benefits instead of index-linked pensions, or perhaps using inflation swap derivatives. Only time will tell whether inflation falls back towards stated targets.”

Pension scheme assets performed well over 2009, seeing an increase of over £100bn for UK schemes as a whole. But plunging corporate bonds yields added to rising inflation expectations to push balance sheet liabilities up by more than £240bn and overall deficits increased despite the rallying markets.

Life expectancy expectations stabilising
One piece of good news for corporates is that allowances for average life expectancy remained relatively unchanged.

Mike Smedley said: “This follows a four year period over which life expectancy assumptions increased by 3.5 years in total, which punched a permanent hole in pension scheme finances.”

According to KPMG”s database, the underlying trend is that slightly lower base expectations have been offset by a typically higher allowance for life expectancy to improve over time.

Notes
KPMG”s Accounting Survey 2010 is based on data from over 300 companies reporting under IFRS, UKGAAP or USGAAP at 31 December 2009. KPMG”s assumptions database extends back to 31 December 2004.

UK pension schemes are estimated to have assets totalling £765bn at 31 December 2008 and £875bn at 31 December 2009 (source: PPF 7800 index) and liabilities under IAS19 are estimated to have been around £875bn at 31 December 2008 (based on data from the Pensions Regulator and KPMG analysis).

If you would like discuss how our Debt Recovery/Debt Collection service can assist your business, please visit the ‘Debt Recovery/Debt Collection’ section on our website,  contact us on +44 (0) 151 515 3014 or email us.

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk)  and the full original article can be found by clicking here.

Research from Britain’s number one comparison site moneysupermarket.com* has found that 63 per cent of balance transfer card users have also used their card to make a purchase. Almost a third of these (29 per cent) users admitted to having never intended to make a purchase on the card in the first place.

Making a purchase of just £50 on a card with an existing balance transfer of £2,500 could cost up to £106 in interest over 12 months, due to the higher APR rate for purchase transactions. Due to the repayment methodology on the majority of credit cards, anyone making this mistake would have to pay off the entire balance transfer balance before they could repay the purchase balance. This is due to a repayment rules, due to be outlawed, known as ‘negative payment hierarchy’ whereby the balance with the lowest interest rates are pay off first.

MBNA today announced it is moving to a positive payment hierarchy as of September 1st this year, four months ahead of the Government requirement. This means anyone with an MBNA card will see their repayments go towards their most expensive debts first.

Kevin Mountford, head of banking at moneysupermarket.com, said; “Despite this issue receiving a lot of publicity over the last few years, it is still worrying that many credit cardholders still make the crucial error on their cards of using them for both balance transfers and purchases. Although many cards advertise zero per cent rates for balance transfers and purchases, the majority of cards only offer short term deals for purchases. Once this deal ends, the outstanding balance is protected and will accrue interest at a much higher APR, typically over 18 per cent.

“The easiest way to avoid this mistake is two use two different cards, one for balance transfers and one for purchases, however in a market where credit is difficult to come by, this is easier said than done. Alternatively you could take out a credit card which offers equal promotional deals on balance transfers and purchases, such as the Virgin Credit Card 12/12 or go for a card such as the Nationwide Credit Card, which operates a positive payment hierarchy whereby the most expensive debt is paid off first. As of September 1st, MBNA cards, which represent a sizeable chunk of the market, will also pay off more expensive debts first.

“If you have made this crucial mistake of using your card for both, then you need to look to balance transfer away to a new card or aim to pay down your balance as quickly as possible.”

* Opinium Research carried out an online poll of 1,933 British adults from 27th April to 3rd May
2010. Results have been weighted to nationally representative criteria.

If you would like discuss how our Debt Recovery/Debt Collection service can assist your business, please visit the ‘Debt Recovery/Debt Collection’ section on our website,  contact us on +44 (0) 151 515 3014 or email us.

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk)  and the full original article can be found by clicking  here.

Company insolvencies have decreased in the first quarter of 2010 by 8.4% bringing the annualised figure to a total of 4,082, a decrease of 17.8% year-on-year. But according to Steve Clancy, Partner at MCR Tax Arrears Solutions, the figures though could be hiding a hidden tsunami of corporate failures, as HMRC increasingly flexes its muscles.

“The decline in the number of corporate insolvencies needs to be seen within the context that over the past quarter the economy has been on pause because of the uncertainty of the result of the UK General Election. Furthermore many of our banks are now in public ownership, and political imperatives may have dictated HMRC not to call in tax debts,” stated Steve.

According to the Budget presented to the House of Commons by then Chancellor Alistair Darling: “HM Revenue and Customs’ (HMRC) Business Payment Support Service (BPSS) has been at the heart of the Government’s support for businesses through the recession, enabling viable businesses experiencing temporary financial difficulties to spread their tax payments over an agreed timetable.

“Since it was launched at the 2008 Pre-Budget Report, the service has reached over 300,000 arrangements to give over 200,000 businesses, who collectively employ more than 1.4 million people, more time to pay over £5.2 billion of tax. The vast majority of these arrangements have been with SMEs.”

“On top of this figure needs to be added the overall debt owed to the HMRC by business which according to The National Audit Office, has risen by £2.7 billion to £27.7 billion in 2008-9. HMRC has already increased the provision for bad debt to £11.2 billion as of March 31st 2009 – 40% of the total owed. And we have yet to get an insight into the debt provisions being made for the current year,” stated Steve.

Steve stated: “The HMRC has provided a number of fast track services to support businesses that have been affected by the economic downturn. But these figures are alarming and there can be no doubt that the total now owed to HMRC could be over £30 billion. In other words HMRC is now acting more like a lender of last resort than a tax collector.”

“But the growing numbers of cash strapped companies that have put off paying taxes are at risk of insolvency because of this. Increases could start as soon as the end of the year as, despite the scheme still being available, we have seen HMRC tighten up on the procedure considerably,” he added.

“After all, if a company cannot pay its current debt, it certainly can’t pay this debt plus the arrears to HMRC,” he continued. “It is crucial that early engagement takes place with all parties involved, including lenders, so that potential solutions can be reviewed as early as possible.

“Business owners also need to be aware that even with the introduction of deferred tax payments, all tax liabilities will still need to be paid albeit over longer and more manageable timescale in addition to meeting all current and ongoing obligations as and when they fall due.

If you would like discuss how our Debt Recovery/Debt Collection service can assist your business, please visit the ‘Debt Recovery/Debt Collection’ section on our website,  contact us on +44 (0) 151 515 3014 or email us.

Please note: Information in this blog post is content property of Business Credit Management UK (www.creditman.co.uk)  and the full original article can be found by clicking  here.