MICHAELJ. PEEL IS A LECTURER IN accountancy and finance at Cardiff Business School, University of Wales, and Nicholas Wilson is Professor of Credit Management at the University of Bradford, England. Very little research has been conducted on the capital budgeting and working capital practices of small firms. The purpose of this paper is to present the results of a preliminary study on the working capital and financial management practices of a sample of small firms located in the north of England. In general, the results of the survey indicated that a relatively high proportion of small firms in the sample claimed to use quantitative capital budgeting and working capital techniques and to review various aspects of their companies' working capital. In addition, the firms which claimed to use the more sophisticated discounted cash flow capital budgeting techniques, or which had been active in terms of reducing stock levels or the debtors' credit period, on average tended to be more active in respect of working capital management practices. It is hoped that the issues raised will stimulate further theoretical and empirical contributions on this neglected and important area of small business research.

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MICHAEL J. PEEL IS W1TH CARDIFF Business School, Wales, AL.Professor Nicholas Wilson is with ILeeds University Business School, England, and Carole Howorth is with Nottingham University Business School, England. Based on the results of a qtuestionnlaire survey, this paper provides some new evidence relating to late payment and credit and working capital m-ianiagenment practices of a sample of 211 small businesses operating in the United Kingdom manufacturing sector. Small firnms are often suppliers of trade credit, despite the difficulties that this often causes them, and there is little empirical evidence on the credit granting decisions of smiall firnms. Theory suggests that firms facing a higher cost of institutional credit (i.e. small firms) are less likely to offer trade credit. Empirical evidence suggests that not only do small firms provide trade credit to their customers but they often finid themselves providing extended trade credit (i.e. are paid after the due dlate( late). It is clear that exten-dedI tu ade ((re(lit plays anl important signallinig' rol(e t'0o smaller- firms wishing to gaini sales anlt establish reputationi. This paper examtillIc. the extent of late payntient 1or stniall suippliers and the cit-t-ent pt acti(es ill tr-ade credit managenmenit. The kex restilts indicate that thei-e was large suppor t amiong respondenits for the cut rrent I JK legislation giving small firms the statuittot J right to initerest orn late payments, xvitlt such legislation being rated tlhe illost popular measuire to reduce late pax'lntelltt and also the highest rated factot- associated wtih improving busilless performance. Inproved credit attd financial management was, however, rated of relatively low import in this respect. In total, 59.5 pet cenit, of respondents stated that late paimet-tt posed an important or very iml1portall-it problem to their- businesses, wvitih 43. 1 pct l cent Oiving a similar resp)ttsi ts c espC of bad debts. 89 per cent indicated that they paid their own suppliers late to a greater or lesser extent. The amount of working capital management undertaken was found to be related to the severity of the problem for individual firms (i.e. necessity was driving action). Responses from the sample firms were found to differ significantly with respect to firm size; larger small firms had a worse late payment problem and consequently had to do more in the way of 'back-end' credit management (i.e. collection, analysis of late payment and debtor days). However, there was barely any support for credit management training among this sub-group. The smaller (micro) firms had a lesser late payment problem and subsequently did less 'back-end' credit management but were more concerned with various aspects of institutional finance. It was posited that the problems faced by small firms are at least partly associated with business size and with the life cycle of the firm.

This study investigates the market for audit services in the UK National Health Service (NHS). The market has a number of interesting features, including the presence of the Audit Commission as a regulator, appointer and provider of audit services. Following a theoretical overview of audit pricing in the NHS, evidence is provided on the behaviour of private sector auditors in an environment where audit risk characteristics differ from the private sector. The research also investigates, for the first time in the public sector, the relationship between audit fees and non-audit (consultancy) fees. Comparisons are also drawn between audit fees in the public and private sectors in an analysis of audit fees by industry. Despite some key similarities, the study shows that a number of differences exist between private and public sector audit fee models. In particular, we find no evidence of Big 6 (or mid-tier) auditor premiums, but we do find a significant negative relationship between audit and consultancy fees providing support for the 'knowledge spill-over' hypothesis. In addition, the fees charged to trusts appear significantly lower than their private sector counterparts, despite trust auditors having additional duties to perform. Possible explanations for this finding are offered in the paper. Copyright Blackwell Publishers Ltd 2002.

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