Late Payment Tips - Small Businesses Chasing £8.3 Billion
As part of a small business you know how
annoying late payment can be, and the
problem appears to be showing no signs of
improving. A new survey from Barclays Local
Business has found that small business in
the UK were owed approximately £8.3billion at the
end of February 2008.
The survey found small businesses would be
spending more than an hour of the extra leap
year day chasing up late payments – equating
on a national level to more than four
million wasted working hours or 544,640
wasted working days.
Nearly six in ten (59 per cent) SMEs
experience problems with late payment; with
a third of this number (33 per cent)
admitting that customers or suppliers
failing to pay on time threatened the
day-to-day survival of their business. 60
per cent of those surveyed felt they wasted
valuable resources chasing debts, while more
than a third (39 per cent) of bosses are
currently using their own money to keep
their business afloat while they wait on
outstanding payments.
John Davis, marketing director for Barclays
Local Business said: “The fact that SMEs in
the UK are facing a £8 billion deficit due
to late payments is extremely worrying. A
regular and reliable cashflow is essential
to the smooth, day to day running of a
business – particularly a smaller one - and
the majority of SMEs cannot afford to wait
on money they are owed without feeling the
impact on their bottom line.
On average, at any given point during the
year, SMEs are owed more than £2,000 from
suppliers or customers who have failed to
pay during the standard 30 day invoicing
period. Entrepreneurs typically have to wait
nearly a fortnight (12.3 days) after the
invoice due date before they get paid.
As a result, approximately 1.5 million SMEs
in the UK have an employee dedicated to
chasing overdue payments equating to yet
more costs. In 90 per cent of the
organisations that don’t have someone
specifically responsible for the job, owner
managers have to pursue outstanding payments
personally; distracting them from the day to
day running of their business.
Top Tips on Tackling Late Payment:
· Go Electronic: Encourage your clients to
pay you electronically, rather than by
cheque – this will boost your cashflow and
mean funds start to earn interest
immediately
· Early Reminders: Don’t leave it until the
last minute to chase customers or suppliers
who haven’t paid – being pro-active can
often pre-empt a more serious payment
problem and lead to a swifter solution that
suits all parties
· Get Tough: Demand interest on late
payments – you’re legally entitled to it,
and it should serve as a deterrent to those
who are considering not paying on time
· Peace of mind: Run regular credit checks
on new customers or suppliers, and take
action (E.g.: Speak to them and discuss the
situation) if their ratings go down
· Sort your system: Agree terms of payment
at the start of all contracts to avoid any
confusion, and monitor your payment system
regularly so overdue invoices are quickly
identified
· Manage your own finances: To save time,
ensure you have online and telephone banking
set up – this will enable you to manage your
own finances more effectively, thereby
promoting healthy cash flow in both
directions
Find out more about recovering debts in our
Debt Collection section.
For help in recovering debts visit
Specialist Debt Collection here.
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