The survival of your business may depend on being paid on time

Business Insights
18/09/2019

Many business owners hate chasing late payers, yet numbers of SME’s are going out of business due to lack of cash flow.


There can be any number of reasons business owners can be unhappy about chasing debt; too busy growing the business, fear of jeopardising a business relationship, a vague idea that most people do pay sooner or later, that taking action may damage the chance of getting paid at all, or that they are simply too lazy.


Then many businesses are too focussed on chasing new business to carry out due diligence on the customer when that exciting big new deal comes in before sending out the goods.


It would appear that it is large businesses which are particularly prone to abusing the credit terms allowed by smaller businesses, with, in a recent survey, 43% of SMEs saying they have experienced late payments for their goods or services from larger businesses. Furthermore, nearly half of all medium sized businesses have been subject to late or otherwise unfair payment practices from large businesses (47%). Similarly, 38% of small businesses report late or unfair payments.


In a survey of 500 UK SMEs 75% admitted that they would fear taking action against a late payment at the risk of damaging their client relationships and 76% said that not getting paid at all for their work was a significant issue for their business.


Paul Uppal, Small Business Commissioner:

"The key findings in this survey highlight that small businesses tolerate late and non-payment due to a fear of reprisal.

“The Government is building an environment in which small and medium-sized businesses can continue to prosper. Through my role, I am committed to keep the spotlight on this issue and instil confidence in the minds of small businesses. I will continue to tackle late payment and address the imbalance in market power between parties, promote transparency and encourage better payment practices through culture change."


Small Business Minister Kelly Tolhurst said:

"The vast majority of businesses pay their bills on time, with the amount owed in late payments halved over the last five years. But as a former small business owner, I know the huge impact a late payment can have on the ability of a small business to plan, invest and grow.

Small businesses are the backbone of our economy and through our modern Industrial Strategy we want to ensure the UK is the best place to start and grow a business. These measures will ensure that small businesses are given the support they need and ensure that they get paid quickly - ending the unacceptable culture of late payment

Late payment is a very real threat to many smaller businesses as according to research carried out by the Federation of Small Businesses, a quarter of UK businesses report late payments being a threat to their survival. Tackling the late payment culture in the UK is vitally important not just for the small businesses directly affected but for the economy as a whole, as it could potentially add £2.5 billion to the UK economy and keep an extra 50,000 businesses open each year.

Getting paid is all about taking sensible precautions, such as credit checking before you invest in stock or equipment in order to supply that big order, taking out credit insurance if there is any doubt about payment, and most importantly, having clear credit terms in place.

Having clear credit terms in place which are followed up promptly and professionally should avoid yours being one of the businesses that goes under due to slow or non-payment for the goods or services which you have supplied."


James Stanton of FreeDebt Recovery commented:

“Not having strong credit control measures in place is a mistake. You are in business to make money, presumably to make a living and support your family. Slow payers have a detrimental effect on your cashflow while protecting their own.”


He further stressed that prompt action on slow payers is key, and explained that the sooner the debt is pursued, the more likely it is to be collected. Using a professional third party collection agency, such as FreeDebt Recovery, to collect any debts for you can help protect your relationship with your customer and is a proven and effective way of getting you the money you are owed.


FreeDebt Recovery collects outstanding monies at no charge to the creditor, recovering their costs under the provisions of the Government’s late payment Legislation.


https://www.freedebtrecovery.org/