An article in today's Accountancy Age has revealed that the Insolvency Service (which is the Government department that deals with individual bankruptcies and the liquidation of companies through the Courts) is shedding some 440 jobs from its Offical Receivers Offices around the UK.
This equates to a reduction of something like 14% of the OR's offices' staff. The reason being given is that the number of personal and corporate insolvencies being dealt with by the OR's offices is falling. However, the Insolvency Service's own statistics for Q3 2010 (the latest available) show total personal insolvencies have only reduced by 3.7% compared to Q3 2009.
Admittedly, the number of bankruptcies have actually fallen by 24% but the number of Debt Relief Orders have risen by 57%. DRO's still need to be dealt with by the OR's offices. With the Government's own spending cuts yet to take affect and the prospect of 500,000 public sector job cuts happening, this really seems short-sighted to me to be reducing the OR's staff levels at this stage. I suspect that the number of bankruptcies will increase during 2011/12 as many public sector workers will not be eligible for the simpler DRO process and will need to enter bankruptcy instead.
(If you need more information on Debt Relief Orders see our website under Useful Stuff/Insolvency Technical Briefs)
Friday, 14 January 2011
Professions Bad with Money!
A recent article in Accountancy Age shows that even the most qualified of professionals can get into financial trouble.
I have to say that my experience over the years has shown that whilst most "professionals" (e.g. accountants, solicitors, architects etc) manage their personal and business finances exceptionally well, when it goes wrong, it goes wrong in spectactular style!!
I think this is mainly down to the fact that these types of individuals are usually high earners and therefore also have a high level of financial outgoings. When the income drops (sometimes even if it is only slightly) then the high level of outgoings creates fiancial problems in a very short space of time.
"Accountant, heal thyself" is a very rare phrase to hear as you would think that this type of individual would be able to deal with 'the numbers' very well. However, many accountants (but by no means all of them) are so number-focussed that practical and commercial acumen doesn't always come into play. Same with solicitors and architects: they get so caught up in doing the job for their client (no bad thing) that they lose sight of the commercial reality. Whilst the client will get a gold standard service, it may only be able to pay coppers.
Having advised an accountantcy practice, a law practice and an architects practice on insolvency matters in the last 12 months, all of these things have rung true.
However, don't be afraid of seeking advice from your accountant, lawyer etc - they will undoubtedly be able to help you. All I will say to the professional is that they need to ensure they run their practice as a business just as much as anyone else who runs a business. If you do start to experience financial difficulties, seek help from an insolvency practitioner sooner rather than later
I have to say that my experience over the years has shown that whilst most "professionals" (e.g. accountants, solicitors, architects etc) manage their personal and business finances exceptionally well, when it goes wrong, it goes wrong in spectactular style!!
I think this is mainly down to the fact that these types of individuals are usually high earners and therefore also have a high level of financial outgoings. When the income drops (sometimes even if it is only slightly) then the high level of outgoings creates fiancial problems in a very short space of time.
"Accountant, heal thyself" is a very rare phrase to hear as you would think that this type of individual would be able to deal with 'the numbers' very well. However, many accountants (but by no means all of them) are so number-focussed that practical and commercial acumen doesn't always come into play. Same with solicitors and architects: they get so caught up in doing the job for their client (no bad thing) that they lose sight of the commercial reality. Whilst the client will get a gold standard service, it may only be able to pay coppers.
Having advised an accountantcy practice, a law practice and an architects practice on insolvency matters in the last 12 months, all of these things have rung true.
However, don't be afraid of seeking advice from your accountant, lawyer etc - they will undoubtedly be able to help you. All I will say to the professional is that they need to ensure they run their practice as a business just as much as anyone else who runs a business. If you do start to experience financial difficulties, seek help from an insolvency practitioner sooner rather than later
Tuesday, 11 January 2011
Community Radio - Insolvency Matters!
I had a great broadcast slot today with 6Towns Radio - a local community internet radio station for Stoke on Trent and North Staffordshire, courtesy of my good friend Nigel Howle from Howle Communications. Nigel can also be contacted on www.Twitter.com/howlecom.
Nigel asked me to do a slot on insolvency matters generally and in particular on HMRC's Business Payment Support Service (otherwise known as the Time to Pay "TTP" scheme). I won't go into it in any detail as my previous blogs have already covered these two areas, but I did follow Shaun Cloyne from HMRC Stoke on Trent who was talking about tax matters and he gave me a perfect follow-on to start talking about insolvency and being unable to pay taxes!!
Community radio performs a great function as it concentrates on local issues - something I'm very keen on. The station itself was started with a small grant but the majority of funding comes from a local businessman - all contributions are therefore wlecome! Contact the station directly.
Nigel asked me to do a slot on insolvency matters generally and in particular on HMRC's Business Payment Support Service (otherwise known as the Time to Pay "TTP" scheme). I won't go into it in any detail as my previous blogs have already covered these two areas, but I did follow Shaun Cloyne from HMRC Stoke on Trent who was talking about tax matters and he gave me a perfect follow-on to start talking about insolvency and being unable to pay taxes!!
Community radio performs a great function as it concentrates on local issues - something I'm very keen on. The station itself was started with a small grant but the majority of funding comes from a local businessman - all contributions are therefore wlecome! Contact the station directly.
Wednesday, 5 January 2011
Mixed Messages for 2011
I haven't blogged for a while, simply because I've been pretty busy the last few months on the run up to Christmas 2010. But, New Year, new determination to inflict my views on the world again!
As an Insolvency Practitioner, I'm not always regarded as the life and soul of the party. However, once a business starts running into financial difficulties, an IP can be a godsend. Just as a reminder of what I'm all about, have a look at my website at www.ipd-uk.com.
2011 will be a difficult year for anyone facing financial difficulties. An article in Accountancy Age on 23 December 2010 sums it up nicely. Bank lending to smaller businesses is likely to increase, but not to any great extent and certainly not to levels previously seen prior to the credit crunch in 2008. UK GDP is expected to grow but only in the region of 1-2% over the year. Estimates of 3-4% I feel are wildly optimistic. That the economy is showing (and is expected to continue to show) at least some growth is very encouraging, but with the increase in fuel duties, increase in VAT to 20% and implementation of the Government spending cuts, 2011 is going to be a very tough year on Joe Public's pockets.
The obvious knock-on of this is that retail is likely to suffer. I'm not going to speculate on which it might be, but I have a gut feeling that 2011 will see at least one, maybe two, more big high street retail names dropping off the perch. I hope it won't happen, but...
Regarding us mere mortals, and by this I mean SME's, insolvencies of smaller businesses are VERY likely to increase. This will be down to several factors:
As an Insolvency Practitioner, I'm not always regarded as the life and soul of the party. However, once a business starts running into financial difficulties, an IP can be a godsend. Just as a reminder of what I'm all about, have a look at my website at www.ipd-uk.com.
2011 will be a difficult year for anyone facing financial difficulties. An article in Accountancy Age on 23 December 2010 sums it up nicely. Bank lending to smaller businesses is likely to increase, but not to any great extent and certainly not to levels previously seen prior to the credit crunch in 2008. UK GDP is expected to grow but only in the region of 1-2% over the year. Estimates of 3-4% I feel are wildly optimistic. That the economy is showing (and is expected to continue to show) at least some growth is very encouraging, but with the increase in fuel duties, increase in VAT to 20% and implementation of the Government spending cuts, 2011 is going to be a very tough year on Joe Public's pockets.
The obvious knock-on of this is that retail is likely to suffer. I'm not going to speculate on which it might be, but I have a gut feeling that 2011 will see at least one, maybe two, more big high street retail names dropping off the perch. I hope it won't happen, but...
Regarding us mere mortals, and by this I mean SME's, insolvencies of smaller businesses are VERY likely to increase. This will be down to several factors:
- HMRC is getting tougher on Time To Pay ("TTP") agreements and are agreeing far less of them. The TTP system has, in my view, been abused by those who either actually could pay their tax normally, or hadn't got a hope of ever paying it and a TTP was an easy touch (in the period running up to the election) to use to simply delay the inevitable. This has resulted in those who could have genuinely benefitted from a TTP being denied the chance;
- VAT increase - need I say more;
- As the economy improves, it may become more attractive to close a struggling insolvent business. Over the last 3-4 years, much of the bank lending to small businesses has been done on the usual security bases, but largely also included a personal guarantee from a director, backed up by a charge on his house. Twelve months ago, closing a company with a £50,000 overdraft would have meant the director losing his house to the bank to pay it. Now, with an improving economy, that overdraft may have reduced down to £20,000 which is more affordable to settle without losing the house.
Judging by the number of enquiries I received pre-Christmas 2010 for insolvency advice, this looks increasingly to be the case...
Whilst I am always happy with an increase in my work, my silver lining is always someone else's cloud. Those clouds can either be light fluffy ones that are easily dealt with if they're tackled early or black thunderheads if matters are left to drift too long. IP's don't bite - use their skills!!
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