Some news, views and comments about everything and anything, relevant and irreverent.
There’s nothing worse than getting the job done and still having the paperwork to do. Actually there is. When that paperwork is the bill, and it’s being ignored. The hidden shame of British business takes the biscuit.
Tunnock’s, Scotland’s confectionary guilty secret (we all love them) have finally won a long running battle with HMRC over what we’ve thought all along. Snowballs are cakes and cakes are zero rated. Astonishingly, the Uddingston manufacturer had to go to court to prove their case, and win a return of almost £3m in VAT charged against their sales. Take High Tea anywhere from the Ritz to the parish church hall, and you’ll be served Snowballs among your other cakey confections. The judges said “Although by no means everyone considers a snowball to be a cake…” Really, m’Luds?
The issue here is the fact that it’s taken forever and a day for Tunnock’s to get their money - that’s their money - and that’s something all other SMEs can relate to. HMRC clearly believed they had a case for withholding payment, but there are a legion of big companies who have no justification at all for making suppliers wait for payment.
Is this a new story? Of course not, but the level to which bills are going unpaid is quite staggering. Companies House data indicates the overall indebtedness of the UK SME market reached £6.3trn in the financial year 2013/14. There aren’t enough zeros in our word processor to write out that figure in full. The average number of debtor days was 47 days for small companies, 40 days for medium-sized companies and statistics show that microbusinesses often wait on average 63 days to be paid. That’s only the average too. In our accounting experience, we’ve noted some sectors that are worse still - traditionally the construction sector is really bad – 60-90 days is the norm and very often can take longer than that.
Plus let’s hope you’re not among the one in eight such businesses who are owed more than a third of turnover at any one time. You won’t just be eating Snowballs this summer, you’ll be rolling snowballs in the garden before you’re paid for this summer’s work!
So make sure you are taking pragmatic steps to insulate your business from the curse of interminable payment terms. Here are just a few examples of how you can do this – raise your invoices as soon as the work is complete, regularly chase your debtors for payment (the old ones too!) and request stage payments as you complete agreed milestones - these are just a few examples of how you can do this. Advice in this arena is an obvious area where Springfords can help. Imparting our own experience is another. Perseverance though might be the best advice. Tunnock’s were told they didn’t have the proverbial, but that company has eventually netted a £2.8m snowball windfall. We’ll crack open a Caramel Wafer to that.