ASSISTANCE AND HELP


This section has been developed to enable you to understand how the solution works. Our unique guide will help you decide what is the best report for you and our financial definitions section offers basic accounting knowledge to help interpret the information.

However, should you have any further questions, please feel free to contact the Help Desk on 01494 790 620 or e-mail us by clicking on CONTACT US on the top of your screen.


DATA PROTECTION ACT

The Data Protection Act applies to 'personal data' that is, data about identifiable living individuals. Credit Assist supplies personal data so as a user of Gateway you must be aware of your responsibilities.

Those who decide how and why personal data are processed, known as data controllers (Credit reference agencies, information providers), must comply with the rules of good information handling, known as the Data Protection Principles, and the other requirements of the Data Protection Act.

The rules of good information handling - the principles
Anyone processing personal data must comply with the eight enforceable principles of good practice. They say that data must be:

Processing personal data
'Processing' is broadly defined and takes place when any operation or set of operations is carried out on personal data. The Act requires that personal data be processed "fairly and lawfully". Personal data will
not be considered to be processed fairly unless certain conditions are met. A data subject must be told
the identity of the data controller and why that information is or is to be processed.

Processing may only be carried out where one of the following conditions has been met:

The individual has given his or her consent to the processing;

The processing is necessary for the performance of a contract with the individual; The processing is
required under a legal obligation; The processing is necessary to protect the vital interests of the individual;
The processing is necessary to carry out public functions;

The processing is necessary in order to pursue the legitimate interests of the data controller or third parties
(unless it could prejudice the interests of the individual).

Processing sensitive data
The Data Protection Act makes specific provision for sensitive personal data. Sensitive data includes racial
or ethnic origin; political opinions; religious or other beliefs; trade union membership; health; sex life; criminal proceedings or convictions.

Sensitive data can only be processed under strict conditions, which include:

Having the explicit consent of the individual; Being required by law to process the data for employment purposes; Needing to process the information in order to protect the vital interests of the data subject or another; Dealing with the administration of justice or legal proceedings.

What does all this mean to you as an Gateway user?

YOU MUST HAVE ACTIVE CONSENT before you perform a search.

You must enter the title, a first name and date of birth (and middle initial if the applicant has one) - to
ensure that the correct persons’ information is returned.

Once you have gained consent for a specific purpose - you must obtain further consent if you want to process it further. Please remember that ‘processing’ covers a vast range of activities to do with the data.

Be aware of the implications of the DPA, non-compliance could result in your business losing its DPA license and therefore, its ability to trade.

For further information please visit: www.dataprotection.gov.uk


COMPANIES HOUSE ALPHA PREFIXES

There are several alpha prefixes which are attached to company registration numbers. These are descriptive
codes indicating the type of company registration. See right for an explanation for the various codes available.

PROFIT AND LOSS TERMS

Turnover
Total invoiced sales for the period, net of VAT. UK sales, exports and overseas sales and inter-company sales will be included.

Cost of sales
Cost components directly related to turnover.

Gross profit
This indicates the profit before deducting depreciation, distribution, selling and administration costs. It is an
indicator of the underlying profitability of a business’s core operations.

Operating Profit
Indicates the profit and loss arising from core business activities. The figure is pre-tax profit plus Interest paid minus non-trading income.

Non-trading income
Comprises investment income, such as income from quoted and unquoted investments, rents received, share of profit from associated companies; as well as reserves adjustments, such as transfers from capital grant reserve. Interest relief grants. Write-offs of investments and intangibles will also be included.

Interest Payable
Interest paid by the business. This will be the net charge for interest after any capitalised element. It should be noted that many private companies do not disclose this figure in full, or aggregate short and long term and hire purchase interest together.

Pre-tax profit
The net trading profit figure after deduction of all operating expenses including depreciation & finance
charges, but before deduction of tax, dividends, subventions or group relief, and other appropriations.
Where applicable it will include the share of profits and losses of associated companies. Items described
by the company as exceptional are included. Extraordinary items are excluded.

Taxation
Tax charges paid against profits. This can be negative, representing a tax credit.

Profit after tax
This figure represents the profit or loss after deduction of corporation taxation but before the deduction of
dividends, minority interests and any extraordinary items.

Dividends payable
This item includes both proposed and paid items and provisions / appropriations determined by FRS4.

Retained profits
This figure is after the deduction of extraordinary items, taxation, dividends and any other appropriations
(e.g. Minority Interests). Essentially, this is the amount carried from the Profit and Loss Account to the
accumulated Profit and Loss Account balance on the Balance Sheet.

Value added
Trading Profit plus salaries and wages. It should be noted that for the value-added calculation, Staff Costs
are grossed up to reflect national insurance costs. Value Added represents the difference between the
Sales Income received and Bought-in materials and services expended in the period.


BALANCE SHEET TERMS

Tangible fixed assets
The sum of Fixed Assets and Intermediate Assets.

Intangible assets
Assets, which do not possess any material, value. Will include goodwill, trademarks, patents and copyrights,
at their amortised book value. These are assets with no “physical” existence, but are deemed to confer
benefits to the business in future periods.

Total fixed assets The total of tangible and intangible fixed assets.

Stocks
Trading stocks, sundry stocks and work in progress net of progress payments.

Trade debtors
Trade debtors, bills receivable and amounts recoverable on contracts due within one year. For smaller companies, when the figure is not disclosed, the figure shown represents total debtors.

Cash
Cash includes the following : Cash in hand; Cash at bank; Cash at bank and in hand; Cash balances.

Miscellaneous current assets
Short term assets other than stocks, trade debtors or cash. Includes items such as:- Bank balances; Bank
account (where not negative); Bank deposit account; Building society deposit. Short term deposits; Bank
current account; Sundry debtors; Amounts due from group and related companies; Called up share capital
not paid; Prepayments and Accrued income; Current asset investments (where these are not short term
deposits).

Total current assets
The sum of Stocks, Trade Debtors, Cash and Miscellaneous Current Assets.

Total assets
The total of Current and Total Fixed Assets.

Creditors: Amounts falling due within one year
Also referred to as Total Current Liabilities, being the sum of Trade Creditors, Bank Overdraft and
Miscellaneous Current Liabilities.

Total Assets less Current Liabilities
Total Assets minus Total Current Liabilities.

Total Long Term Liabilities
The sum of Long Term Bank Loans, Other Long Term Finance and Other Long Term Liabilities.

Total Liabilities
The sum of Current and Long Term Liabilities.

Share capital and reserves
The sum of Called Up Share Capital and Sundry Reserves.

P&L Account Reserve
The accumulation of profits/losses from previous trading periods including the retained profit/loss from
the Profit and Loss Account.

Revaluation Reserve
Also known as investment revaluation reserve, property revaluation reserve, and unrealised capital gains
on valuation.

Shareholders’ Funds
The sum of Called Up Share Capital, Sundry Reserves,P&L Account Reserve and Revaluation Reserve.

Capital Employed
The sum of Shareholders’ Funds and Total Long Term Liabilities.

Net worth
Shareholders’ funds minus intangibles. Often referred to as the book value of the business. The long-term
realisable value after all liabilities are cleared.

Working capital
Obtained by subtracting total current liabilities from thetotal current assets. This represents the surplus /
deficiency of funds from normal trading activities.

Contingent Liabilities
These items are extracted from the notes to the accounts and include all ‘potential’ liabilities such as guarantees, indemnities, cross guarantees, HM customs and excise, letters of credit and VAT registration.


CASH FLOW STATEMENT TERMS

Net cash flow from operating activities
Cash receipts and payments from normal operations.

Net cash flow from return on investments and servicing of finance
Cash derived from holding investments matched against the cash utilised in paying the interest on finance capital and the dividends on equity capital. This is a useful indicator of the business’s performance. A negative figure would indicate poor profitability or poor management of working capital efficiency.

Net cash flow before financing
This is the total cash generated or used by the business before any funding activity and movements in the cash balances. If positive, the business has generated a cash surplus, which can be used as liquid funds or
to repay debt.

Net cash flow from financing
Cash derived from the issue of equity capital or the use of loan facilities matched against the cash utilised
in repaying borrowings.

Increase in Net cash
A reconciliation of cash movements in terms of cash and cash equivalent balances.


NOTES TO THE ACCOUNTS TERMS

Exports
This figure represents direct exports from the UK.

Employees’ remuneration
’Wages and salaries’ figure - excluding social security, pension costs etc., where possible.

Director’s remuneration
All payments made to directors including pension fund contributions, benefits in kind and ex-gratia
payments to their families.

Audit fees
The auditor’s charge for the statutory audit, which excludes accountancy charges and other non-audit
related fees.

Non audit fees
This refers to amounts charged by the auditors for services other than the audit.

Depreciation
This indicates the amount written off tangible assets (including leased assets) during the period.

Average number of employees
Average number of employees employed during the period.

Fixed assets
This represents a number of items, including the following: property, plant, fixtures, fittings, office
equipment and motor vehicles, all at written down value. This will include leased and capitalised assets,
and, for some industries, assets held on a long-term basis and constantly replaced for renting or hiring out.

Intermediate assets
This represents investments in subsidiary and associated companies, trade and other unquoted investments, long term amounts due from other group and associated companies and any other long term debtors.

Due from group non current
Part of intermediate assets, amounts due from other group companies, associated companies that are
received over one year, and with no stated fixed repayment terms.

Due from group, current
Amounts due from other group companies or associated companies that appear to be receivable
within one year.

Trade creditors
This figure includes short-term, i.e. within one year, portion of trade creditors and trade bills payable. For
smaller companies, where trade creditors have not been separated out, the figure will represent total
current liabilities.

Bank Overdraft
This includes overdrawn bank account, negative cash items and bank indebtedness.

Bank loans, current portion
Instalment of bank loan due for repayment within 12 months.

Other short term finance
This includes any undefined ‘Loans’ or ‘Loans’ from non-banking sources. Typically hire purchase obligations,
leases, factoring advances, stocking loans, debentures, mortgages, capital creditors, amounts due to group and directors within one year.

Due to group, current
Loans due to group companies due in one year.

Due to directors
Directors loans due in one year.

Other Current Liabilities
This includes all other sundry creditors, accrued expenses and pre-paid income, including dividends, corporation tax, social security or other sundry amounts payable within one year.

Short term loans
The sum of Bank Overdraft, Bank Loans (Current Portion) and Other Short Term Finance.

Long Term Loans
The sum of Long Term Bank Loans and Other Long Term Finance.

Long Term Bank Loans
Instalments of bank loans repayable in more than one year.

Other Long Term Finance
This includes long-term portions of hire purchases and leasing obligations; amounts due to other group, associated or affiliated companies; portions of trade and sundry creditors payable in more than one year.

Due to Group, non-current
Loans due to group/related companies over more than 12 months.

Due to directors, non-current
Directors’ loans due in more than 12 months.

Other Long Term Liabilities
This includes deferred tax, future tax, minority interests, pension fund liabilities, provisions for liabilities and pre-paid income.

Called Up Share Capital The total value of shares issued. This represents the share capital currently invested in the business.

Sundry Reserves
This includes capital reserve, share premium, related companies’ reserves, merger reserve, consolidation reserve, and capital based grants.


BUSINESS RATIOS TERMS

Profit/Sales (%)
This represents the percentage of sales left as profits or losses before tax. In general, if profitability is the main driving force, the higher the result the better. It should not however, be taken in isolation. Also known as the Profit Margin.

Profit/Capital Employed (%)
Often used as a primary measure of company performance. This ratio is taken as an indication of how much profit a business yields relative to the money invested. Also referred to as Return on Capital.

Profit/Total Assets (%)
Shows as a percentage the value of the pre-tax profits in proportion to the value of total assets.

Profit/Shareholders funds (%)
Expresses the proportion of pre-tax profit made in relation to the value of the shareholders funds.

Sales/Total Assets (%)
Shows as a percentage the value of sales in proportion to the value of total assets. Also referred to as Asset Utilisation.

Sales/Fixed Assets ®
Shows as a ratio the value of sales in proportion to the value of fixed assets.

Sales/Total Fixed Assets (%)
Shows as a percentage the value of sales in proportion to the value of fixed assets.

Working capital/Sales (%)
Surplus or deficiency of funds from normal trading activities in relation to its size, measured by sales.

Stock Turnover ®
Turnover divided by stocks held. Generally speaking, the number of times stock is renewed each year.

Credit Period (days)
The number of days, on average, for the company to collect trade debt. Calculated by dividing Trade Debtors by Sales and multiplying by 365 days.

Creditor days (days)
The number of days it takes the company to pay trade creditors. This ratio provides an indication of the amount of credit given to the business by its suppliers. The formulae is trade creditors, divided by sales, multiplied by 365 days.

Current ratio ®
This represents the number of times the business’ short-term assets cover its current liabilities. It measures the ability to meet its day to day commitments.

Liquidity ratio ®
This represents the number of times a customer’s quick assets can cover its current liabilities, quick assets being defined as current assets less stock. This is taking into account the fact that it takes a reasonable amount of time for stock to be converted into cash.

Total Debt/Net Worth (%)
A way of measuring the “gearing” or “leverage” of a business, by comparing total loans (short and long term) to net worth.

Bank Overdraft & Long term liabilities/Net Worth ®
This ratio represents the relationship between the bank overdraft & long term borrowings and other amounts due over 12 months, against the net worth.

Shareholders funds/Total Liabilities ®
This represents the business’s liabilities as a ratio of shareholders’ funds. This ratio provides a measure of protection given by shareholders to other parties who contribute funds, e.g. banks, creditors etc. A falling ratio indicates increasing financial risk.

Long Term Debt/Net Worth (%)
This represents the debt outstanding beyond 12 months in relation to net worth.

Long term liabilities/Net Worth ®
Ratio of liabilities due over a year in relation to the net worth.

Interest/Pre-Interest Profit (%)
Sometimes referred to as Income gearing, this measures the proportion of pre-interest profit which is required to service debt.

Total Debt/Working Capital ®
A gearing measurement which compares total borrowings with the surplus or deficit of funds from normal trading activities.

Bank Overdraft & Long term liabilities/Working Capital ®
Ratio of bank overdraft and liabilities due over 12 month period in relation to the working capital of the business.

Bank O/dft & Long term liabilities/Total assets
This indicates the relationship between debt and asset value of the business.

Average employee remuneration (GBP)
Employee remuneration divided by the average number of employees.

Wages/Sales (%)
Indicates the amount of sales revenue expended on employees’ pay, showing the marginal cost of employment.

Profit /Employee (GBP)
Amount of profit before tax made per employee.

Sales/Employee (GBP)
This is often used as a measurement of productivity. It indicates the amount of sales revenue generated by
each employee.

Capital Employed/Employee (GBP)
Capital employed per employee.

Fixed assets/Employee (GBP)
Fixed asset investment per employee.

Total assets/Employee (GBP)
Total assets in comparison to the number of employees.

Profit/Value added (%)
Pre-tax profit as a percentage of value added.

Value added/Sales (%)
Sales figure as a percentage of value added measurement.

Value added/Employee (GBP)
Employees in relation to the value added.

Value added/Employee Remuneration (GBP)
Employee’s remuneration in relation to the value added.

Creditors/Debtors ®
The ratio of trade creditors to trade debtors.

Debtors/Total Assets (%)
Trade debtors in relation to the total assets of the business. This measures the value of moneys owed in relation to business’s asset base.

Current Liabilities/Stock ®
Liabilities to be paid within 12 months expressed as a ratio
in relation to value of stocks.

Export/Sales (%)
Amount of sales revenue attributable to export business as
a percentage of total sales.

Sales/Audit fees ®
Comparison of sales revenue to cost of audit.

Total assets to audit fees ®
Comparison of total assets to audit fees.

Shareholders’ funds/Total assets (%)
The relationship of the business’s assets to shareholders funds.

Sales/Capital Employed ®
This measures the amount of revenue generated by a business in relation to the level of investment made. Referred to as Capital Utilisation and when combined with profit margin gives the principal measure of profitability, return on capital.

Stocks/Working Capital (%)
The value of stocks represented as a percentage of the working capital of the company.

Current assets/Total assets (%)
Percentage of current assets against long term assets; indicates where the asset base rests.

Profit/Current Liabilities (%)
Pre-tax profit in relation to liabilities due within the next 12 months.

Sales/Current liabilities ®
Sales expressed as ratio to those liabilities due within next 12 months.

Net Cash/Current Liabilities ®
Net cash (defined as cash less bank overdraft) expressed as a ratio to those liabilities due within the next
12 months.

Liquid assets/Total assets (%)
Percentage measurement of liquid assets against total asset base - good indicator of which assets could be quickly realised.

Net Worth/Total assets - Intangibles (%)
This measures the accounting value of the business against total assets. Intangibles are discounted as they cover perceived value such as goodwill, R&D development, patents, trademarks etc.

Net Worth/Total fixed assets (%)
This measures the net worth of the business against those assets whose value may be great, but are not necessarily quick to liquidise. Fixed assets normally make up a far greater proportion of total assets.

Net Worth/Current Liabilities (%)
This measures the short-term percentage risk against the value of the business.

P&L Acct Reserve/Net Worth (%)
Accumulated profits/losses as a percentage of shareholders’ funds less intangible assets.

Revaluation Reserve/Shareholders funds (%)
This takes into account revaluation of investments or properties and measures it against the shareholders’ funds.

Bank Overdraft/Current Assets (%)
The current bank overdraft as a percentage of short term assets. A good measurement of whether these assets coverthe bank overdraft.


CASH FLOW STATEMENT TERMS

Net cash flow from operating activities
Cash receipts and payments from normal operations.

Net cash flow from return on investments and servicing of finance
Cash derived from holding investments matched against the cash utilised in paying the interest on finance capital and the dividends on equity capital. This is a useful indicator of the business’s performance. A negative figure would indicate poor profitability or poor management of working capital efficiency.

Net cash flow before financing
This is the total cash generated or used by the business before any funding activity and movements in the cash balances. If positive, the business has generated a cash surplus, which can be used as liquid funds or
to repay debt.

Net cash flow from financing
Cash derived from the issue of equity capital or the use of loan facilities matched against the cash utilised
in repaying borrowings.

Increase in Net cash
A reconciliation of cash movements in terms of cash and cash equivalent balances.


RISK SCORE

We have for many years, supplied credit opinions about incorporated companies in order to provide
informed support for the granting of credit facilities. These opinions have been based primarily on detailed examination and interpretation of company balance sheets, profit and loss accounts, and payment performance. Although it is possible to obtain data on individual companies by way of their Annual Reports and Accounts, the data is presented in a variety of styles, all of which require some degree of interpretation to provide information in a uniform way.

We cam overcome this difficulty within the structure of our Business Information database by transforming the data into a standard format, thus providing a consistent source of corporate information based on the most recent accounts and those of earlier years.

The value of the Business Information database has been enhanced during the past two years with the introduction of the Risk Index, designed to provide a broad banding of the risk associated with any limited company for which sufficient data is available. This index was initially based on a scorecard developed
using the practical experience of those involved with the provision of credit opinions, using traditional
methods for assessing the likelihood of success orfailure.

What is the Risk Index?

The Risk Index is a statistically derived risk rating system for limited companies that predicts the likelihood
of company failure within a next 12 month period. The Risk Index has been developed to address the growing pressures felt by credit grantors for a method of corporate risk assessment that is:

Simple to understand

The Risk Index ranges from 0 to 100, giving a relative risk rating for each company.

Robust

The scoring model development incorporated a representative sample of actively trading Limited Companies. The performance of these companies was assessed 12 months later, and used to build the statistical model which would predict the likelihood of company failure within a 12 month period. The model incorporates up
to 18 different factors including the size and movement in shareholders funds, capital employed, liquidity, profitability, the incidence of county court judgments, and delays in publishing accounts. The inclusion of several “year on year” changes in the scorecard ensures that the Risk Index is responsive to the dynamics of the accounts over time.

Regularly Updated

We refine the scoring model on a periodic basis to ensure that the latest economic trends are incorporated into the scoring system.

Accurate and Powerful

The Risk Index discriminates between good and bad companies.

Average Good/Bad Odds per Risk Band for a Recent Validation Sample

Cost Effective

By using the Risk Index, credit grantors can reduce the number of referrals and thus reduce the number
of occasions when more comprehensive (and more expensive) information is required for underwriting borderline cases. It can be used as a filter to make automatic decisions on the very bad and very good
cases, leaving the borderline cases for more in-depth investigation by experienced underwriters.

For example, with cut-offs set at 25 and 65,

Easy to use

The Risk Index is easy to use, as the following example illustrates;

XYZ Trading Company Ltd wants credit of £1000
Risk Index = 54 Good:Bad Odds = 8:1

This means that for every eight companies taken on with this level of risk, one would be expected to fail
within the following 12 months. The credit grantor must decide, given his margins, any security, and
any other factors known to him, whether this represents an acceptable risk.

Calibration

We can advise the credit grantor on the use of the Risk Index in their environment. However, in order
for a credit grantor to gain the maximum benefit from the Risk Index, we would recommend that a calibration exercise be performed against a sample of the lender's previous accounts. A calibration
exercise involves taking a sample of past accounts (both good and bad), and calculating what the Risk
Index would have been at the time of application. Analysis is performed to determine where an
appropriate score cut-off should be placed to deliver a specific level of bad debt (depending on the risk
appetite of the lender) or a specific accept rate.

Associated Credit Rating

Credit Rating is intended as a guide to an acceptable average credit level per supplier for the company in question. It should not be taken to mean the maximum allowable credit. Normal Credit Rating figures are
as follows:

Credit Rating & Codes

For situations not covered by the normal Credit Rating figures, the following Special Codes are used:

Risk Score Components

The items that are most predictive of corporate failure are listed below:

- Date of Incorporation
- Date Dissolved
- Accounts Type
- (Credit Code Override)
- SIC Codes
- Parent
- Ultimate Parent
- Financial X 3 years
- Accounting Period
- Currency
- Date of Accounts
- Capital Employed
- Current Assets
- Current Liabilities
- Shareholders’ Funds
- Turnover
- Retained Earnings
- Pre-tax Profits
- Fixed Assets
- Long Term Loans
- Other Long Term Provisions
- Number of Directors
- Date of latest Receiver Appointed
- Date of latest Receiver Ceasing to Act
- Date of latest Winding Up petition
- Date of latest Winding Up Petition Dismissal
- Date of latest Winding Up Order
- Date of latest Voluntary Liquidator Appointed
- Date of latest Resolution to Wind-up
- Date of latest Intention to Dissolve
- Date of latest Company Dissolved
- Date of latest Company Re-instated
- Date of latest Appointment of Administrator
- Date of latest Dismissal of Administrator
- Date of latest Revocation/Suspense/Completion
of Voluntary Winding-up
- Date of latest Compulsory Liquidator Appointed
- Number of Judgments in Last 12 Months
- Value of Judgments in Last 12 Months