Late payment is killing our businesses, says Dave Butler, regional sales
director at Close Invoice Finance
At any one time, £20billion is owed to UK businesses, which more than demonstrates the major headache that late payment has become. It is obvious that the temptation to run an organisation on other people’s money is far too strong for many firms.
But while there are plenty of companies in the UK that seem willing to wait more than six months for their customers to pay their bills, the stark reality is that around one in four businesses fail because of cashflow difficulties. But what can owner managers do?
In the absence of further government help to resolve the late payment issue, company owners need to look more closely at the way their business is funded. The biggest danger has to be not knowing who you are dealing with. There are many sources of credit information:
specialist companies, banks, local Business Links, chambers of commerce, local grapevine or a visit to the premises. It takes only a couple of hours to check out a potential customer, and companies should do so.If a customer is deemed acceptable, payment terms should be agreed at the outset of a deal – and stuck to, and payment procedures explained to all relevant parties. Smaller firms can often be reluctant to negotiate terms but they should follow the example of major organisations which would, almost without exception, thrash these out beforehand.
Income and expenditure should be monitored carefully and any potential holes in the cashflow flagged up straightaway for immediate remedy. It can often help to cultivate a relationship with a customer’s accounts staff. Strong lines of communication can often offset some of the damage caused by late payment.
Prompt invoicing is crucial. Invoices should be clear and accurate and dispatched no more than 24 hours after delivery. They should also specify the date by which payment should be made.
Finance products which enhance cashflow and avoid late payment hassle should also be researched, particularly factoring and invoice discounting. Both of these can provide an immediate tailored solution to a business’s funding issues.
It is often the simplest precautions which prove to be the most effective against late payment, allowing owner managers to boost business profits rather than battle for corporate survival.
David Butler can be contacted on dbutler@closeinvoice.co.uk