Sector Focus: Legal
Cash flow crisis - collecting late payments
Ensuring payments are received on time is crucial to small businesses and has a major impact on economic growth, yet 78% of SMEs report they are having to wait for payment a month or more beyond agreed terms. Terhi Sygrove (pictured), Debt Recoveries Manager at Rothera Sharp Solicitors, discusses the impact of late payments on SMEs and advises on steps that business owners can take to retrieve their money.
each business, with the latest figures showing that the total cost owing to small businesses has risen substantially from £2.6bn in 2017 to £6.7bn. In addition over a third of
T
SMEs dealing with late payments are waiting two months over the agreed terms to be paid - double the number compared to 2017, with businesses in the East Midlands having to wait an average of 41 days to be paid, the second worst waiting time and four days over the UK average waiting time of 37 days. A quarter of business owners
report that late payments are a threat to their survival as delays in receiving payment can create a ripple effect, forcing business owners to make late payments to their own suppliers or reduce their own salaries, which 28% said they have done in order to retain cash in the business. Yet the Federation of Small Businesses argues that if large businesses paid on time there would be huge possibilities for economic growth, suggesting that an extra 50,000 businesses could
74 CHAMBERconnect Summer 2019
he cost of recovering overdue money now stands at an average of £9,000 for
be kept open and an additional £2.5bn could be added to the UK economy. Under the Reporting on Payment
Practices and Performance, which came into force in April 2017 all large companies have to publish statistics relating to the average number of days taken to make payments, the percentage of payments made within set periods of time and the percentage of payments due which were not paid within the agreed payment period. In response to the
poor payments crisis facing UK small businesses and coinciding with the
regulations above, the Small Business Commissioner was launched in December 2017 to support the 5.7 million small businesses in the UK and bring about change in payment practices between businesses and across sectors. There are also a number of steps
that SMEs can take to retrieve their money or ensure they are not facing late payments:
Knowledge is power Find out what you can do about suppliers and their payment practices before you start doing
business with them by researching them online, carrying out company and credit checks and asking other business owners. Conducting your own risk assessment can minimise your chances of using a non-paying customer.
Agree terms Work out payment terms with customers so that it is clear from the outset when you expect to be paid, and get signed approval. Make your terms easily accessible and clearly set out the consequences to customers if they don’t pay on time.
Keep track Make a note of when an invoice has been issued to a supplier, especially if it is for a large amount and check that the supplier has actually received the invoice and it was sent to the right person. Accounting software can also be useful for keeping track of customers who pay late.
Detail is key Make sure your invoices are accurate so the customer has no grounds for finding reasons to delay payment or fail to pay entirely, e.g. they can’t claim that there was a mistake on the invoice or it was confusing/incorrect. If your customers have purchase order numbers or references,
include those. It is also a good practice to refer to your terms of business in your invoices or at least have a clear reference to any late payment penalties or interest charges you may charge in the event of late or non-payment.
Offer various payment methods Make it as easy and as quick as you can for customers to pay, by offering various payment methods including online payment platforms with clear instructions on how to do so.
Know your rights If you are chasing payment, look into your rights under late payment legislation, as you may be able to add debt recovery costs or charge the supplier penalty interest, which will hopefully give them more of an incentive to pay.
Seek advice If, despite numerous attempts you are still having trouble claiming back money owed to you then it may be worth instructing a solicitor. Doing so may actually save time and be more cost effective than you think, as in many cases a letter from a solicitor threatening court proceedings is all it takes for the supplier to pay up.
Visit:
rotherasharp.co.uk
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96
