Simple credit control measures could help one in ten businesses nationwide to stay operational in the face of delayed payments.
According to figures from Yorkshire Bank and its north-of-the-border equivalent, Clydesdale Bank, 10% of companies would not be able to survive if their clients took over 90 days to pay their invoices.
But head of invoice finance Martin Rothera says simple measures can help companies to prepare for any disturbances to their cashflow - and figures from the banks show how these strategies are helping to cut down on delays for many businesses.
Avoiding a Bad Debt Headache
Mr Rothera says that bad debts and late payments are "a headache" for businesses, particularly those which are profitable and ambitious, but whose disturbed cashflow means growth is more difficult to achieve.
In some cases, this is leading to firms taking out insurance to protect them against lost credit - effectively paying upfront to offset the fear of a customer developing a bad debt.
An alternative to this would be to invest in improved invoicing and payments collection processes, providing ongoing improvements to help protect cashflow.
Mr Rothera says:
"Adopting simple procedures, such as agreeing payment terms and conditions upfront, or using incentives for early payments, can have positive effects.
"However, if late payments are a concern or are restricting cashflow, it is important to be rigorous in the debt collection process."
That, he says, means seeking a "swift resolution", enlisting the help of debt collection services, and even going so far as to record any conversations with the debtor.
Swift Progress on Credit Control
The advice comes amid a climate of tighter focus on credit control for many companies, as evidenced by the banks' survey.
In the research, conducted among customers of the Clydesdale and Yorkshire Bank Invoice Finance team, 13% reported that their sales have increased since the beginning of 2011.
Clearly, this suggests that ground-level conditions are improving throughout the UK economy - but this still leaves the study's headline figure of 10% of firms whose survival relies on prompt payment.
Mr Rothera explains that consistent cashflow is a must for businesses that need to buy stock, pay wages, and meet the costs of their own invoices for goods and services.
And it seems the banks' invoice finance customers are acting to preserve their cashflow, as the average time taken to settle invoices now stands at 49 days - a three-day improvement over the past ten months.
This means £6.7 billion of payments are progressing faster, allowing the recipient companies to pay their own invoices faster in turn, and to make investments into growth that will benefit both themselves and the wider economy.
Across the board, the research demonstrates the value of keeping a close eye on credit control, both in financial terms and in terms of the overall health of a business.
However, with the average payment still taking seven weeks to clear, there is still more to be done for firms who would like to see their invoices settled sooner by clients of all sizes.
If your company would like to improve it's collection times then take a look at our co-sourced credit management solution First Call Plus. This service outsources the day to day credit management and collection activities of your business for a fixed monthly fee.