With late payments continuing to blight the small business community, how can owners minimise their exposure?
According to the latest research from the Federation of Small Businesses (FSB) over a third (37%) of small businesses have experienced cash flow difficulties as a direct result of late payments. The average amount owed is in excess of £6000, with invoice settlement periods now over 100 days in some cases. Even with the EU Late Payment Directive being enforced, this has had little impact improving the levels of late payment.
A new payment dispute service under the new Small Business Commissioner was launched in late 2017. It is hoped that this will offer more transparency when late payment occurs, plus a mechanism for checking the payment records of companies.
There are practical steps that can be taken to reduce the instances of late payments and their impact on business.
1. Always ensure terms are clearly communicated and agreed before goods or services are provided.
2. All invoices should have the correct information to avoid payment delays.
3. Sending invoices to the correct address is essential. Find out the structure of the accounts department which will give the correct people to contact for help with late payments.
4. Offer incentives for early settlement. This can often prove to be a worthwhile technique to use.
5. Develop accounting systems to escalate contact with customers to ensure late payments are identified and then chased. Don’t be afraid to ask for money owed.
Small business owners should not simply accept that late payment is a fact of doing business today, but take all the practical action they can to reduce this burden on their firms.