The smallest firms in the UK are being paid late, in some cases by over a year, due to a lack of urgency and a sense of awkwardness about chasing clients for payment, new figures suggest.
A survey carried out by online accounts software provider FreeAgent revealed that just one in seven micro-businesses that issue invoices have never had to deal with an instance of late payment.
For the remaining six in seven - 86% of those surveyed - that means money that was rightfully owed to them has arrived late and, in some cases, very late indeed.
The research found that one in eight have been paid over a year late on at least one occasion in the past - so what are the smallest firms doing to tackle the problem?
Backward about coming forward
Unfortunately, the survey found the same reluctance to deal with late payers that is often a hallmark of micro-businesses, whether due to a lack of understanding about how to chase clients for payment, a lack of time, or a lack of inclination to do so.
Nearly three in ten (28%) said they take action within the first week of an invoice going overdue, but nearly a third also said they do nothing for the first month.
Ed Molyneux, co-founder and CEO of FreeAgent, said:
"When you're running a business it's really important to get paid quickly - late-paying clients can create major cash flow problems which in extreme cases can lead to the failure of your business.
"But our research shows that many UK micro-business owners face real problems when it comes to getting paid on time. We also found that many micro-business owners are waiting for months before they chase an unpaid invoice, and that's really too long."
"We know that it can be awkward to chase clients and ask them for money, but if you don't follow up with late payers from the moment that their invoice is overdue, they may not see the urgency in paying you."
Sending a message
We have always said, when an invoice goes overdue, it is important to take prompt action so that it is not simply forgotten about by you, your customer, or both; you can even send a polite reminder before the payment deadline arrives, to show that you will not forget that it is due.
If you don't send a clear message at the time, it becomes much, much more difficult to get the debtor to pay up without some kind of enforcement action or debt recovery action.
We know from experience that many small and micro-businesses will feel awkward in chasing clients for payment when they go overdue and that there can be a reluctance to use a debt collection agency for fear of losing customers. But this doesn't need to be the case. Outsourcing is an integral part of any small business as it is one of the easiest ways of sourcing specialised knowledge. Securing addtional help with your company credit control and debt collection need be no different.
As with any supplier for your business it is simply a case of finding a company you can trust that understands your requirements and can deliver the tailored support you need. We have been offering tailored credit control solutions and small business debt collection services for more than three decades and are proud of the help and support we provide to our client base.
If you are considering outsourcing your credit control or debt collection get in touch with us for a free, no obligation discussion on your options.
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.
Image "Calendar*" from Dafne Cholet is licensed under CC BY 2.0