Due Diligence is an essential business tool…

“Due diligence” is an investigation of a business or person prior to proceeding with a transaction or entering into a commercial relationship. The primary purpose of due diligence is to place the investigator in a position where they are able to rely on their findings in order to make an informed decision, having carefully considered any implications regarding costs, benefits and risks. In some circumstances, due diligence can be a legal obligation but the term more commonly applies to voluntary investigations.

An individual may be in the fortunate position of having access to material that will assist with their investigations. However, it is more common that the investigator will be ‘starting from scratch’ with little information available to them. In those instances where information is available, the investigator may not have the experience or knowledge to utilise that information to its full potential. Where this is the case, due diligence is arguably more than merely ‘a waste of time’ as reliance on information that has been misinterpreted could prove detrimental to the user.

Why take unnecessary risks in an important business transaction before knowing who you are dealing with?

Why waste legal costs in pursuing debtors who have little or no money or assets?

If you have any queries regarding due diligence or would like assistance with a due diligence investigation, please do not hesitate to contact a member of the Dunion & Co. team on 01782 828 733.

What is an ‘IVA’?

Individual Voluntary Arrangements (IVAs) provide a solution to people with debt problems without the long-term consequences of bankruptcy.

Essentially, an IVA is a contract between an individual and their creditors, to pay back all / part of their debts, usually via monthly payments, over an agreed period of time.

Monthly payments are based on affordability; a review of your income and outgoings will be completed, in order to establish what you can afford to pay into your IVA each month.

Most IVAs last for a period of five years (60 months). However, it is possible to offer a ‘one off’ payment to your creditors from, for example, the sale of a property, redundancy monies or the introduction of funds from a third party, e.g. relative or friend.

Upon the approval of an IVA, you will cease to make payments directly to creditors, and creditors are required to freeze interest and charges.  Once the IVA is completed, any outstanding balances on debts will be written off.

An IVA is a way of avoiding bankruptcy, which can be catastrophic for a business owner.  An IVA is particularly useful for an individual who risks losing their professional qualifications or practicing licence if they are made bankrupt, e.g. solicitor, accountant, banker etc.

To discuss an Individual Voluntary Arrangement please contact Dunion & Co. today by calling 01782 828 733 or e-mailing us on enquiries@dunionandco.com.

Calling all Accountants!

  • Is your client a director of a limited company?

  • Has the Company been trading for over two years?

  • Is the Company facing financial difficulties?

  • Is the director faced with the possibility of the Company ceasing to trade?

If so, it is likely that your client can make a claim for director redundancy, for which the average claim is currently £10,000.  In addition, they are likely to be able to claim for other statutory entitlements, such as notice pay, holiday pay, and unpaid wages.

Even if the company is already in liquidation, it is likely that a claim can still be made for post-insolvency redundancy payments (in addition to other statutory entitlements).

Call us for a chat, if you would like to know more.

01782 828 733 | enquiries@dunionandco.com | www.dunionandco.com

Cash Flowing…plan it well!

One of the most common reasons that a profitable business becomes insolvent, is poor planning in respect of cash flow.

Problems with cash flow often arise, rather ironically, after a period of fruitful trading.  When trading is profitable, it is easy to become complacent and to assume that trading will remain at the desired level.  Operating under this assumption, large cash reserves can suddenly seem unnecessary and money may be withdrawn from the business’ bank account, for other purposes.

However, this complacency can cause problems if something unexpected then crops up.  If a business is stripped of its reserves, it loses the ability to easily cope with a crisis and, as a result, it could be rendered ‘insolvent’.

If you have any queries regarding the content of this blog, please do not hesitate to contact us on 01782 828735 or enquiries@dunionandco.com.

Late Payments: Our Top 5 Tips!

OVER half of the invoices issued by the UK’s small businesses were paid late last year, according to research recently carried out by Xero.

The survey found that these delays caused 53.6 per cent of small businesses to start 2018 in negative cashflow.

Late payments can be incredibly problematic for small businesses, potentially creating a downward spiral.  Businesses, keen to maintain a good relationship with customers, may allow long periods for late payments to be settled which can leave them without the cash flow to pay their own suppliers and providers.  This then has a knock on effect…and so on.

Here are five tips to help minimise the risk of late payments: 

  1. Make your payment terms clear from the start*

When you establish a new relationship with a customer or client, your payment terms should be stated explicitly, and included on any contracts and invoices. If you don’t do so, then you won’t have a basis to complain when payment is not forthcoming, although current late payment legislation (see below) sets a default payment period of 30 days before a payment becomes ‘late’, unless otherwise stated.

  1. Have an accounts contact*

Always ask for a specific person to send invoices to. This will make it much easier to follow up any overdue invoices.

  1. Maintain a payment tracking system*

It is crucial that your invoices are organised. At a glance, it should be easy to identify the status of all invoices issued – most importantly, which ones are about to become due and which ones are overdue.  By doing so, you can prioritise those invoices that need to be chased, minimising the time spent on doing so.

  1. Charge interest on late payments*

Although as a small business you may be reluctant to charge interest on overdue payments, you have every right to do so.  Under the terms of the Late Payment of Commercial Debts (Interest) Act 1998, and Late Payment of Commercial Debts Regulations 2002, businesses have the statutory right to charge interest on late payments, and reclaim ‘reasonable’ debt recovery costs.  Under the terms of the legislation, you can charge interest at a rate of the current Bank of England base/bank rate + 8%, so currently a total of 8.5% (as at January 2014).

To calculate the interest you can charge a late paying client, multiply the owed amount by the interest rate (8.5% in this example), and divide this sum by 365 days. This is the daily rate you can charge until payment is received.

  1. Professional debt recovery*

In many cases, all it takes is a single phone call from a professional debt recovery firm for payment to be made.  Further steps can be taken, of course, including issuing proceedings with a view to taking the matter to the County Court.  In the majority of cases, things never progress this far, as few businesses can afford to have a County Court Judgement issued against them.

If you have are facing difficulty as a result of late payments, please do not hesitate to contact the team at Dunion & Co. on 01782 828 733.

Cash Flow: Affecting Turnover and Profit

The Institute of Directors recently carried out a survey of its members and users, which showed that 20.3% of directors felt that Cash Flow was the main factor affecting turnover and profit:

The IoD’s Senior Economist, Tej Parikh, said: “The macroeconomic environment has been particularly challenging for businesses across all sectors over the past year. On the one hand, high inflation has squeezed households which has held back consumer spending, and on the other, Brexit-related uncertainty has clouded investment decisions. With price levels on their way down and progress on EU negotiations, the picture will hopefully brighten up.”

www.dunionandco.com | 01782 828 733 enquiries@dunionandco.com

50% of businesses operating in the red…

50.1% of small businesses in the UK were operating in negative cash flow last year, according to research carried out by Xero.

The Test!

The Insolvency Act 1986 provides two means of testing whether a company is ‘insolvent’, one of which is called the ‘Cash Flow’ test.

This is a relatively simple test, with an easily identifiable outcome: is the company able to meet its obligations, as and when they fall due?

The Legal Stuff…

A company director has a legal obligation to understand the company’s financial position and should know whether the business is comfortably able to meet its liabilities…or whether it’s facing pressure as a result of them.

If the latter, it is important that professional advice is sought in order to understand the implications of the company’s position, together with all of the options available to it.

For more information, please contact us on 01782 828 733 or enquiries@dunionandco.com.

www.dunionandco.com

‘Tens of thousands of freelance workers facing bankruptcy…’

Tens of thousands of freelance workers accused of tax avoidance say they are facing bankruptcy as the taxman demands sums as high as £900,000.

Her Majesty’s Revenue & Customs (HMRC) is seeking money owed by almost 100,000 contractors who used “disguised remuneration” and similar schemes that avoided paying national insurance or income tax in the 2000s.

Taken from ‘The Times’, read more HERE

Whilst in certain circumstances bankruptcy may be the appropriate solution, it is often seen as a ‘last resort’ means of dealing with personal debt problems.

There are alternatives to bankruptcy, which is why professional advice should be sought by anyone considering this option.

It is generally the case that the earlier advice is sought, the more options there are available to address financial difficulties.

As an example, those individuals accused of tax avoidance are facing the addition of penalty charges and interest rates, which often doubling the value of the original debt.  This means that time really is of the essence; as time goes on and the debt increases, it is likely to limit the options available, meaning that bankruptcy may be unavoidable.

For more information, contact us on 01782 828 733 or enquiries@dunionandco.com.

 

Posted in Tax