Tuesday, 19 February 2013 13:44

SMEs hit by 'repeat offending' late payments three or more times a year

Small to medium-sized enterprises (SMEs) are struggling to tackle late payments from clients who, in the worst instances, miss three or more invoices per year.

Almost half (47%) of SMEs surveyed by Barclays said that their least reliable customers fail to pay on time at least three times each year.

 Overall, a shocking 85% of all small businesses in the UK have had to deal with late payments at least once in the past two years.

This has led three in ten to use their own money to plug the gap, one in five have suffered extreme levels of stress, and more than one in ten (11% of those surveyed) faced the edge of insolvency before their client funds arrived.

Sue Hayes, managing director of Barclays' business banking, says:

"With one in five businesses that cease trading citing bad debt as the reason, it is vital that SMEs tackle this problem and take action before it is too late."

Repeat Offenders

The full range of possible ways to deal with late payments is almost unimaginably broad, from formal and proactive methods like instigating careful and consistent credit control processes, to more off-the-cuff attempts to deal with the problem reactively.

More than one in five of those surveyed by Barclays said they have started denying future business to clients who do not pay on time - effectively an equivalent to the Stop List approach we have suggested on this blog in the past.

The majority of all firms - 60% of the survey's respondents - have badgered either the client or their legal team to settle more promptly, similar to our regular assertion that "he who shouts loudest gets paid first".

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Three in ten have asked clients to pay upfront, which is a reasonable action to take with known non-payers (partial payment upfront is equally reasonable if you're carrying out work for a new client for the first time).

And nearly a third, 32% of those surveyed by Barclays, have instigated legal proceedings, or threatened legal action, in order to prompt a client into paying up in full.

Coordinated Credit Control

At Safe Collections, we argue in favour of a coordinated approach to credit control - we can help you to reclaim any outstanding debts you might be owed, but we also know that a proactive approach is most effective for the long term.

That means making sure your invoices are accurate when they are first issued, that they are sent to the right place, and that you confirm receipt.

When the deadline arrives, confirm whether payment has been received, and act immediately if your invoice appears to have been overlooked.

Be fair but firm in your dealings with the client - if you are prepared to extend the deadline, put a specific revised date for payment in place, and do not be tempted to allow them to delay beyond that point.

If it becomes apparent that they are unable or unwilling to pay, we can pursue them for the funds through the appropriate channels, which often allows interest to be added to the amount they owe.

Together, these logical and consistent steps in the credit control process can help to keep your finances - and, importantly, your cash flow - under your own control, and your balance book looking as healthy as possible.

Over 150 Years Of Industry Experience

Our modest but highly skilled team has a combined total of over 150 years of experience in commercial credit management and B2B debt collection. From independent IT contractors to major film and TV publishers, Safe Collections has the knowledge and experience you need to get paid quickly and cost effectively.

Original Article

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