Don't let late payment derail you
By Paul Spencer, director, Haworths
The UK’s smallest businesses are facing a collective bill of £6.7bn to collect money they are owed by other companies, up from £2.6bn in 2017, according to a recent report in the Financial Times.
And more than one-third are waiting two months beyond agreed terms for payment, up from a fifth last year.
The figures follow in the wake of the findings of the parliamentary Business, Energy and Industrial Strategy Committee (BEIS) which described bad payment practice as a drain on the nation’s productivity.
Getting paid on time is a widespread problem, so what can businesses do? Here are some tips that may help:
Know your client. When you take on a new client check them out, get to know their financial situation, and their track record of payment.
If they’ve left a previous supplier find out why. Take your time and be thorough.
Get proper terms and conditions in place. They should deal with payment terms in clear and precise terms – and set out your rights of remedy if payment is defaulted.
Make sure your customers know your terms and get a signed acknowledgement they have read and understood them.
Chase debt early. Act with speed if you suspect a client is in trouble. It can make all the difference in recovering what’s owed to you. Don’t let things go on; racking up the amount you are owed.
It’s also important to have systems in place to chase what is owed to you. Poor cash flow can be a real threat to the future of the business – have robust processes in place to mitigate that threat.