Small companies suffer working capital pinch

Siemens financial services dissected the annual accounts of thousands of UK
companies, revealing that smaller businesses’ Days Sales Outstanding (DSO) has
risen from 69 days in 2004, to 80 days in 2006.

It released a study showing that late payment to smaller companies has
worsened over the past two financial years.

The group attributed the declining situation to a climate of increased
competitive pressure as larger corporates put the squeeze on minnows further
down the supply chain, forcing them to ask their small suppliers to extend
payment terms.

Jonathan Smith, head of professions at Siemens, called for firms to help out,
providing the necessary advice upfront before problems snowball: ‘I think it’s
their duty to hold the torch and lead them, but the majority of the firms we are
talking about aren’t KPMG, they are sole traders. They should actually be going
to clients and keeping them up-to-date on the use of techniques such as asset
finance and invoice discounting.’

The malaise at the bottom end of the scale contrasts with medium-sized and
large companies which have kept DSO steady at 62 days and 47 days respectively.

Accountants could advise their smaller business customers better, especially in
the IT sector where DSO stands at 156 days, on how to harness alternative
financing measures, Siemens said.

‘The responsibility should be passed onto the professional bodies. There’s
also a real need for a legislative shift. We can’t have small businesses left to
fend for themselves, there has to be some change at government level.
Accountants should also be calling for changes in the interests of their
clients’ prosperity,’ Smith said.


Google in tax deadlock with SEC

Google is taking on the Securities and Exchange Commission in a bid to settle
a tax dispute.

The web search corporate disclosed in its 2006 annual report that the US
watchdog had called into question how it accounted for income taxes.

In its annual 10K securities filing, Google said it had received an initial
letter from the SEC on 16 March 2006 detailing various bones of contention. The
corporate subsequently began negotiations with the regulator, but the tax
dispute remains unresolved.

’We believe that we properly account for our income taxes. We will continue
to work to resolve these comments with the SEC,’ Google said in the annual

SME FDs under FSA radar

Small company finance directors could be targeted by City watchdog, the
Financial Services Authority, as part of its enforcement regime for the Treating
Customers Fairly incentive. The FSA announced that it would be targeting ‘senior
managers at small firms’. FSA head of retail enforcement Jonathan Phelan said
that the increased scrutiny of both firms and individuals was designed to
reinforce the importance of senior management responsibility. The warning comes
just weeks before the March final deadline for TCF implementation.

‘Even within small firms, senior managers bear the responsibility for making
sure the outcomes are the right ones for consumers,’ Phelan said.

US predicts record finance chiefs turnover

Shareholders and boards have been warned to prepare for record turnover among
chief financial officers in 2007, following a survey from executive services
firm Tatum.

The survey suggested that Sarbanes-Oxley-related headaches, unrealistic
demands from board members and chief executives will drive more than 2,300 chief
financial officers from their positions in 2007. ‘Corporate America may soon
find that creating shareholder value is impossible with what is quickly becoming
an itinerant chief financial officer,’ said Tatum chairman and chief executive
Richard D’Amaro.

‘Many CFOs are fired or resign not because they weren’t a good match for the
company when they were hired 20 months ago, but rather because the business has
evolved so quickly that their capacity and capabilities are no longer an ideal
match for the company,’ he added.

A record 2,302 US chief financial officers left their positions in 2006.

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