Over the past few months, we have had a number of enquiries from prospective clients about credit and how to manage it. Below are just a few of the questions we have had and our answers to them:-
Q. What is credit?
A. Credit comes from the latin word 'credere' which means to trust. It is the ability to obtain goods or services before payment and trusting that payment will be given in the future which allows the person granting the credit to sell more goods.
Q. What is the role of credit in the financial system?
A. There are several different types of credit used within the economy such as trade credit, export credit and consumer credit:
Trade credit is the largest use of credit for a majority of businesses. This is where the customer purchases goods or services from the supplier on account to pay them back at a later date. When the goods are delivered, a set amount of time is given for payment such as 30,60 or 90 days. Without trade credit, the supplier would have a limited access to market their products which would lead to a lack of commercial viability.
Export credit allows UK businesses to reach similar markets overseas. Without this form of credit, overseas businesses would choose local suppliers over international ones which will cause a lack of demand for goods from the UK.
Consumer credit is mainly used to encourage a long term demand for houses, cars, consumer goods and services to the public. Without this, there would be a drastic reduction in demand for these items which would affect the house market and several industries which would result in job losses.
Q. What is meant by bad debt?
A. Bad debt is the amount written off by the business as a loss and is deemed as an expense to the company. This occurs when the business has exhausted all avenues of collection and has been unable to recover the debt.
Q. Is there a difference between credit control and credit management?
A. No, they are one and the same. Credit control and credit management is when companies increase their sales revenue by extending credit to customers who are deemed a good credit risk and denying credit to consumers who aren't a good credit risk as this reduces the company's exposure to bad debt.
These are just a few questions that were asked. If you would like any of your credit questions answered just comment on this page, email us at info@icreditenforcement.com, tweet us at @ICEPACC or facebook us. We are happy to help!
Saturday, 21 July 2012
Tuesday, 10 July 2012
England's Law Courts Rule
England’s law courts are being inundated with disputes involving the super-rich from across the globe.
The high-profile battle of billionaires Boris Berezovsky and Roman Abramovich is just one of dozens of overseas cases filling the High Court, which appear to have little to do with this country. Nine out of 10 commercial cases handled by London law firms now have an international link, according to government statistics.
Ministers say London’s concentration of “legal and financial” expertise is unrivalled, while the Ministry of Justice said the Rolls Building, the new High Court extension, is the largest “specialist centre” in the world for the resolution of commercial disputes.
Home-based lawyers believe it is all down to the quality of English justice in comparison with foreign legal systems. David Allen, head of litigation in London for the Mayer Brown law firm, said the High Court attracts such cases because English justice is the envy of the world. “We have extremely high calibre judges here so commercial parties can rely on a rational decision. They are not corruptible, which is more than can be said about the jurisdictions from which some of these parties hail,” he said.
“The English courts are quick and efficient and deliver judgments which are rational, fair and swiftly delivered.”
The judgment in the Berezovsky v Abramovich case — in which the rivals are haggling over shares in a Russian company — is expected to be handed down by Mrs Justice Gloster before the Easter break. It will be followed next month, also in the Commercial Court division of the High Court, by another showdown between eastern European oligarchs Michael Cherney and Oleg Deripaska. This also is a dispute over shares.
The biggest winners from the surge in overseas cases are the barristers and law firms. But courtroom translators and interpreters are also benefiting. An interpreter providing simultaneous translation of proceedings can charge £300 a day. An oligarch would often use their own translator, who would be on a far greater salary. The Ministry of Justice has an annual budget of £60 million for interpreter services for courts, including criminal courts.
Oligarchs at war in the capital
Boris Berezovsky v Roman Abramovich
Judgment awaited in claim for £3.2 billion damages. Berezovsky alleges that his rival intimidated him into selling shares in oil company Sibneft for a fraction of their true worth. Abramovich says there was no formal agreement and denies that he threatened Berezovsky.
Michael Cherney v Oleg Deripaska
Trial due to start in May over a £2.3 billion claim; Cherney alleges an unpaid debt and is demanding the equivalent of one fifth of Deripaska’s company, Rusal. Deripaska rejects the claim, making counter allegations against his opponent.
JSC BTA bank v Mukhtar Ablyazov
Litigation running for two years between the Kazakhstan state-owned bank and its former boss. It claims he stole more than $5 billion. Ablyazov was sentenced to prison for contempt of court last month. He is believed to have fled to France.
Commentary: Roubles and dollars roll in
Never have the corridors of the High Court echoed so much to Russian voices.
Court benches are piled high with files packed with documents in Cyrillic script pinned to English translations.
In the Cold War days Russians were depicted as hatchet-faced men in greatcoats with snow on their boots. Now they come in Savile Row suits and polished leather shoes and with a trophy wife on their arm. Highly-paid lawyers are loving it but is the expansion in overseas cases with little apparent link to Britain in danger of turning the commercial courts into a version of libel tourism? Equally, are our courts being filled with these cases at the expense of justice for English cases? The answer to both questions is probably no.
English Contract law is recognised as being fair and reasonable and not weighted in favour of the litigant.
And its cases are coming to court far faster now that judges have been put in no doubt that they are responsible for time-keeping. But the efficiencies brought in at the High Court — where cases mostly operate without a jury — are attracting untold millions in euros, dollars and roubles. At a time of recession that is not to be dismissed lightly.
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Monday, 9 July 2012
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Monday, 2 July 2012
Blow for George Osborne as recession is deeper than first feared
The double-dip recession is deeper than originally feared as revised figures today showed a sharper decline in the economy in the final quarter of last year.
Gross domestic product (GDP) shrank by 0.4% between October and December, compared with a previous estimate of 0.3%, while the economy contracted by an unchanged 0.3% in the first quarter of this year, the Office for National Statistics (ONS) said.
The figures mean the current recession - defined as two or more quarters of declining GDP in a row - is more severe than first thought.
The impact of the weak economy was underlined by household spending figures, which showed expenditure falling by 0.1% compared with a previous estimate of 0.1% growth.
The downward revision will heap more pressure on the Government and fuel criticism that Chancellor George Osborne's austerity measures are choking off the recovery.
And in a further sign that the Chancellor's deficit-busting plans are struggling, Government spending grew at its fastest rate in nearly seven years between January and March, the ONS said.
The 1.9% surge in Government expenditure was driven by higher spending on public administration, health and defence.
Meanwhile, the decline in household expenditure in the first quarter was driven by a fall in spending on financial services and social protection.
The decreases were partially offset by spending on food and drink and recreation and culture.
The construction sector declined by a larger than previously estimated 4.9%, its worst performance since the first quarter of 2009.
Industrial production sector output, which includes manufacturing, was also revised downwards to a fall of 0.5% from a 0.4% decline.
Despite the overall decline in GDP, growth in the powerhouse service sector, which makes up 75% of the economy, was revised upwards from 0.1% to 0.2% in the first quarter.
Economists and business leaders have warned that a technical recession will hit confidence and could cause businesses to rein in spending at a time when they are being encouraged to invest to stimulate growth.
But the current downturn is expected to be nothing like as severe as the previous recession of 2008/09, which spanned more than a year.
Vicky Redwood, chief UK economist at Capital Economics, said the economy is likely to remain in recession in the second quarter, shrinking 0.5% across the whole of 2012.
She said: "Given the negative impact of June's extra bank holiday, GDP is likely to have contracted again in the second quarter.
"Indeed, there are still numerous factors likely to constrain the recovery going forward, not least tight credit conditions."
Courtesy of London Evening Standard
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