- 06 Jun
How I Analyse Financial Accounts
Analysing the financial position of an individual or a person is not a straightforward thing to do, but having spent a number of years working within credit underwriting, I have dissected countless sets of financial accounts.
Often the information that is available, even if you subscribe to credit information services, it can be fairly limited. In addition to financial accounts (which you can get for free from Companies House) a credit report may give you payment performance data, and details of other financial issues e.g. court judgements.
This series of posts about analysing financial positions are for information only, you should not rely on my approach for the process of granting any form of credit.
Analysing Someone's Financial Position For Free
I thought it might be helpful to outline the process that I go through when trying to understand the financial position of a party, without paying for credit information. You can do this for people that you know, or people in the public eye e.g. celebrities. I have recently had a look at several well known public figures that purport to have a lot more wealth than the available, free online credit information, seems to suggest.
With a celebrity, the first step may be trying to determine the name of the business that they use to receive income. For example, some of this type of information may be gleaned from looking at their websites, or other posts about them online. You could search for their real name online, as many use a stage name.
The first thing I do is a simple search in Google.co.uk, using the individuals name (and/or company names). Normally I use inverted commas around the name, in order to get a more accurate result. This tells Google to return only that specific phrase, and no variations on it. This can yeild news items about the party, perhaps a website, LinkedIn profile etc. You can drill down into each, to get as much publically available information as possible.
The other day, I was told about an individual that had left behind a failing company, with a number of disgruntled employees, a quick Google search revlealed local news paper items explaining the situation, what had led to the current position, and the insolvency process that their company was now undergoing.
Looking At Someone's Business Interests
If the person has business interests, these may require that financial accounts are filed at Companies House, so there may be a bit more information to go on. This is not the case though if they trade as a sole trader or partnership.
I normally go to beta.companies house.co.uk, as their free website allows you free access unlimited filed information about companies, and the individuals involved with them.
Searching against an individual's name, you should be able to find a list of the directorships, or connections that they have to different companies.
The first thing to note is that if they trade as a sole trader or as a partnership, accounts will not necessarily be available via Companies House. However, if they use Limited Companies, PLCs or other forms of limited liability entities, there should be accounts available.
When it comes to looking at a set of accounts, the first thing that I would look at is the general information as to when the company was set up, which gives an idea as to how established it is. If it is a newly formed company, the chances are that accounts will not yet be filed. Therefore, the amount of information available is going to be extremely narrow.
If there are financial accounts available, there are various things that I look for, when reading through them. I start by looking at the date of the accounts, to ensure that they are relatively recent. Bear in mind that currently, companies have up to 9 months from the financial year end, to file their financial accounts - so they are always historic and outdated by their very nature.
Also, companies with turnover of less than £6.5M pa, and a balance sheet of less than £3.26M have no requirement for their accounts to be audited (verified by Accountants), hence they could be unrealiable.
Profit And Loss Account And The Balance Sheet
The above is not intended to be a comprehensive guide to analysing financial accounts, and I am not an accountant, but it includes some pointers based on the approach that I tend to take. If you need help understanding financial accounts, you should seek support from a qualified accountant.
If you are looking for protection against bad debts, caused by customers not paying you, please speak to Sean on: 03330 113622.
- 11 Nov
How To Get Invoices Paid
This post explains the steps that you can take to get invoices paid.When you offer your customers trade credit, typically you will raise a credit invoice that you send to the customer to request payment at a given future date. At that point the customer becomes your debtor.In some trades, such as construction, instead of an invoice an "application for payment" is presented to the customer. Which...
- 11 Oct
Credit Control Tips
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- 13 Aug
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- 23 Jul
100K Average Sales Outstanding Are Not Being Chased Up.
According to new research on behalf of Lloyds Bank Commercial Banking, London based businesses are owed an average of £98,000 in outstanding customer invoices, and a third of UK businesses that were paid late in the last year, DID NOT chase up their outstanding payments.This research was reported by Business Money (10th July 2019), and it is unbelievable to think that London businesses could...
- 13 Jun
Notes On Analysing A Company Balance Sheet.
Analysis of a company's balance sheet allows you to understand what assets and liabilities fall within the business, and whether the business is liquid (has enough liquid assets to pay its short term creditors as they fall due) and solvent i.e. assets exceed liabilities. Therefore it can be helpful in trying to establish the financial position of a company e.g. to decide on granting a credit...
- 07 Jun
How I Analyse A Profit And Loss Account
Analysing the profit and loss account (P & L) of a company can give you some idea of how well the business is trading. You should be able to see if its sales volume is growing, or decreasing. You should also be able to see whether it is profitable, or it is loss making.Growth or profitability provides no guarantee that you will be paid on time, or that the business even has the money to pay you....
- 05 Jun
A Warning About Invoice Fraud.
Avoiding invoice fraud is an important part of providing invoice finance and running any business. We were recently speaking to one of our funding partners who outlined a fraud methodology that is being currently being used. This method of boosting the credit worthiness of a company had been used in an attempted fraud against this particular funder.The fraudsters start by acquiring a company...
- 15 Apr
Help Raising Sales Invoices To Customers On Credit Terms
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- 22 Mar
Selective Invoice Finance With Free Auto Dunning
Selective invoice finance is a service that we are often asked about by prospect. There are a growing number of companies offering the service, and as I have mentioned in previous posts the operational approach and pricing can differ between providers.We have regular meetings with the providers, in order to keep up to date with the structure of their products, their pricing approach etc. We had...
- 15 Feb
Saving The Annual Salary Of A Credit Controller
According to figures published by Payscale, the average salary of a UK credit controller is now almost £21K per annum, with additional bonuses and commission averaging a further £6.5K, excluding employers national insurance, and any pension contributions you have to make (currently a minimum of 2% of earnings).DISCUSS OUTSOURCING OR FACTORINGAt the top end of the pay scale, the basic salaries...
- 18 Jan
Late Payment Problem?
Battling with a late payment problem? You might feel like you are all alone by recent research from Close Brothers Invoice Finance suggests that is not the case. It suggests that many other UK SMEs are being affected by slow payments, and this has been highlighted by several sources of independent research.Their poll found that 42.8% of SMEs say that late payments are a problem for their...
- 15 Jan
Solutions To Late Payments From Customers
Late payments are still causing cash flow problems for UK SMEs.An email just received from one of our new funding partners, My Muse, was headed "48% of SMEs impacted by late payments". It goes on to quote some recent Dun & Bradstreet research that has revealed that the average amount owed in late payments has increased by almost 25% over the last year to an average of over £80K. Within this...
- 14 Dec
Costs Of Collecting Late Payments Rising According To New Research
New research from Bacs Payment Schemes Ltd (Bacs) shows that the cost of collecting late payments, due to SMEs, has more than doubled to £6.7 billion (£2.6 billion in 2017).A huge 78% of SMEs are now forced to waiting 1 month or more, beyond their standard terms, to get paid by their customers. That is a huge amount of cash tied up in unpaid receivables.40% of SMEs affected by late payments say...
- 18 Jun
Why Do Large Companies Pay Late?
I've just answered a question posed online about "why do large companies pay late?".Firstly its worth mentioning that this does not apply to all large companies. We deal with numerous financial services companies who tend to pay very quickly.There are a couple of key reasons for some large companies paying late, which are explained below. Despite there having been a tightening up on large...
- 30 May
Collect Invoices Faster As An Alternative To Borrowing
There is a huge cash flow benefit to be acheived from collecting in your sales invoices faster, in a timely manner.The quicker you get paid by your customers, the more cash and hence working capital you will have available to your business, and therefore the less you will have to source e.g. by borrowing.If you have an outstanding sales ledger of £100,000, and a debt turn of say 60 days (the...
- 07 Apr
Do You Know The Standard Payment Terms Your Customers Can Take?
Did you know that the standard payment terms in the UK are 30 days from the date of your invoice?Many will not be aware that if you did not specify payment terms within the contract with your customer, there are default standard credit terms that will apply to your invoice. At the current time, those are payment within 30 days of the invoice date. You can check this for yourself on the government...
- 20 Feb
Chasing Invoices Via Social Media
I noticed an interest in chasing unpaid sales invoices via social media and I thought it would be good to add something about this to our existing comprehensive credit control guide.The first question is whether this is the right channel to use or not?I think the truth is that if you have resorted to using social media such as Twitter, Facebook, LinkedIn or Google+ to chase your invoices, you...
- 17 Nov
Need Help Chasing Invoices?
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- 02 Aug
Credit Control Agency
One of the credit control agencies that we work with have been able to provide some first class credit control support to one of our clients, who needed help getting their unpaid invoices collected in. The agency took over the collection of the invoices from customers and they have improved the speed with with they are paid, reducing our client's debt turn. So they have a good track record of...