Top Tips to Fight Late Payment in 2008
As part of a small business you know how
damaging late payment can be; and sadly the
outstanding payments owed to small and
medium sized businesses is continuing to
rise, reaching £18.6billion according to
Bacs Payment Schemes Limited (Bacs), the
company behind Direct Debit and Bacs Direct
Credit.
SME owners from around
the country claimed fewer of them were
experiencing late payment problems than a
year ago (59% in 2006 versus 51% today).
However, further probing from Bacs about the
value of outstanding money unearthed a
bleaker picture. Figures showed that the
average amount owed to an SME at any one
time is £30,000 - an alarming figure
considering almost a third (29 per cent) of
those surveyed claimed they could go bust if
faced with overdue invoices of up to just
£20,000.
The not-for-profit
industry body behind Direct Debit and Bacs
Direct Credit also found that almost a fifth
of SMEs (19 per cent) now employ a dedicated
person to chase in late payments – losing an
average of 17 working days a year to this
onerous task.
Commenting Michael
Chambers, managing director of Bacs said:
“Making the decision to employ someone to
chase in late payments is a big step for any
SME company – and it can be effective. But
it can also be time consuming and repetitive
month-on-month if the right tactics aren’t
employed from the start. British SMEs need
to be much smarter about tackling late
payments and should use a range of
solutions, including automated payments, to
stamp out the problem once and for all.”
To help SMEs in their
fight, Bacs has produced five handy hints
that every business owner should consider:
- Credit check
clients and suppliers up front. If you
knew a company had experienced financial
problems in the past, would you still
give them 30 days credit?
- Once you have
signed a contract with a trading
partner, encourage them to pay all
invoices straight into your bank account
by Bacs Direct Credit. Include your sort
code and account number on invoices
along with the message “Pay Me Direct.”
This small step can save time on payment
reconciliation and queuing at the bank
to pay in cheques.
- If you have prompt
payers, why not reward them? Offer discounts
to early payers encouraging them to keep the
money flowing in.
- Get familiar with
UK business law, especially if you have
customers that frequently pay you late.
In the UK, all business owners and
managers are entitled to claim
reasonable debt recovery costs and
Statutory Interest under late payment
legislation. For more information go to
www.payontime.co.uk/legislation/legislation_main.html
.
- Practice what you
preach! Save your own suppliers time and
money by paying them on time. This can
be made easier with Bacs Direct Credit.
It’s also worth settling your regular
business bills by Direct Debit. This
approach could help you negotiate better
payment terms and avoid penalty charges
on any overdue invoices or bills.
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