The scourge of unpaid invoices threatening the survival of small and medium sized businesses is an international problem. In Australia, things have got so bad that some companies are turning to desperate debt collection methods to try to recover money owed to them.
As a new report revealed that the average Australian business is typically owed £23,000 in outstanding invoices, one industry spokesman suggested hard pressed firms are ready to return to an old and infamous solution - biker gangs.
Consider the following scenario. You are a small, up and coming web design company contracted to create a brand new site for a consumer-facing business. They want the works, attention grabbing graphic design, cutting edge multimedia content, intuitive and interactive navigation, and quality text content. Your small team spends weeks painstakingly programming the source code and curating the content to the client’s specifications. Finally, the site is ready to go live. You are rightly very proud of what you have created.
At this point, the client suddenly goes quiet. Won’t answer the phone, won’t return emails. The payment period on your invoice lapses. You offer to negotiate, still nothing. What do you do?
A new report has confirmed the shocking impact that unpaid B2B debts have on the UK economy.
A survey of SMEs by Amicus Commercial Finance found that the average small business in the UK writes off a staggering £12,000 each year in unpaid invoices, mainly from larger customers and clients.
Taken across the entire economy, that adds up to an unbelievable £50bn a year in lost revenue - or £134 million lost to bad debt every single day.
Three quarters of the businesses surveyed said they had written off debts entirely in the past year. Amongst the worst affected group, businesses with 50 to 249 employees, a quarter of all invoices are not being paid on time, if at all.
The only thing anyone can be certain about at this stage following June’s vote for the UK to leave the EU is that no one is going to be certain about anything else very quickly. Brexit has understandably created huge interest and nervousness in the business community as companies try to work out how the break from Britain’s largest trading partner will impact on them.
When it comes to managing your finances in business, knowledge really is power. And this is never more the case than when you are signing agreements to sell your products and services.
As a creditor, the main thing you want to know is whether you are going to be paid fairly and on time. The last thing any business wants to do is get into an arrangement and end up not getting paid.
They call it the greatest show on Earth. With 11,000 athletes from 207 countries taking part in 306 events, the 2016 Rio Olympics did not disappoint in terms of size, delivering a mammoth festival of sport unrivalled by anything else on the planet. But with mammoth size comes mammoth challenge, namely the gigantic task of organising and running the show. Staging the greatest show on Earth demands one of the biggest logistical operations - and a truly global effort.
Having to deal with invoices that are not paid on time is stressful for any business owner. Late payments can seriously disrupt cash flow, take precious time to sort out, and can sour relationships with clients.
Most late payments are one offs and arise from perfectly understandable circumstances. With a little dialogue and a little patience, most can be resolved amicably. But what about that small minority of clients who persistently pay late?
For thousands of small to medium sized businesses, cash flow is probably the single most important aspect of financial management. And yet when it comes to planning and forecasting, it often receives scant attention. Indeed, many businesses unfortunately only realise how crucial cash flow is when problems occur.
Small and medium sized businesses need to be aware of a rising wave of frauds affecting companies big and small. The current most frequently used type of fraud is often called “Fake CEO Fraud” and we would urge all UK businesses to stay vigilant or potentially stand to lose significant sums.
So you have just won a new client. You aced the bidding process, the initial project meetings went well and the money is good. You can’t wait to get started, when out of the blue you get the following note from their finance people:
“Please be advised that our payment terms are 60 days from date of invoice. This will override any payment terms stated on your invoice. Payments will be processed accordingly on the final Friday of each month.”
What do you do?