Are late payments costing UK companies?

Three in five small companies in the UK were faced with clients or customers who failed to pay invoices on time in the past 12 months.


That’s according to new research from Satago which highlights the precarious state that many SMEs are finding themselves in under current economic conditions.


The firm, which tackles late payments, said that 61% of smaller companies were not paid on time while 19% – equating to 928,000 firms – were kept waiting for three months or more.


Perhaps the most worrying statistic as far as UK companies are concerned though, is that 15% of firms had invoices that were not paid at all.


As a result, 40% of firms revealed they are writing off bad debt every single year but that can pose problems for their finances.


For firms operating on small budgets, being forced to write off any funds is incredibly difficult and places a great deal of pressure on all operations with the company.


In certain cases, business rescue becomes the only option, while other business insolvency measures could also be required to resolve the situation.


According to Satago, one issue that SMEs face is that they do not have effective procedures in place for chasing debts and money which they are owed.


Three quarters of firms in the study did not have a person or procedure in place to chase payments, while more than half did not have an escalation process for instances of late payments.


Furthermore, only three in ten firms are using late payment regulations to charge indebted customers, despite the legislation being in place.


Since many SMEs do not have processes in place for chasing debt, they use a wide range of methods to attempt to get their money.


These range from telephone calls and emails, to the threat of legal action, to even turning up at a customer’s property in person, according to the study.


Businesses choosing to operate with trade credits should ensure they have the processes in place to track and enforce payment, or it could cost them dearly.


By Phil Smith


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