Late payment culture continues to plague UK small businesses
Late payments continue to blight small businesses across the UK, hitting supply chains and piling pressure on to their finances.
It is suggested that 50,000 SMEs stop trading every year as they are unable to overcome the cash flow issues they face.
The Federation of Small Businesses has regularly called for action to prevent the poor practices that are seen across numerous sectors.
But despite this, the problem persists and it is estimated that more than £14 billion is owed in the form of unpaid invoices.
Small businesses owners therefore need to address the issues that they face as quickly as possible, as a failure to do so could ultimately leave them facing insolvency.
Tackling late payments is reliant on businesses not only chasing for what they are owed, but also on managing cash flow effectively, be that through alternative finance options, loans or refinancing.
These methods are all designed to ensure that a business can access finance to cover any periods of low or difficult trading.
Businesses need to take a certain amount of responsibility over their invoicing when tackling late payments too, as wrong information can be used to delay payment.
Larger companies will often have strict rules surrounding reference numbers and formatting, so all information should be checked thoroughly.
By simplifying the process, and by setting shorter payment periods, it should be possible to ensure that payments are made more swiftly, thus easing the burden on cash flow.
Communication is key in this regard, as building strong working relationships with clients can make doing business an easier process.
Tackling late payments requires a proactive approach and businesses should keep a watchful eye on their deadlines once invoicing has taken place – reminders should be sent and payments chased once that time expires.
In instances where significant payments are still owed, businesses should consider their legal options and should be firm with clients if they continue to be unreliable.
A failure to get payment could put the longevity of a company at risk and action should be taken before insolvency or restructuring methods are required.
By Phil Smith