Sharon Walker, debt recovery manager at regional law firm Napthens, a Boost & Co member, offers some advice on how growing businesses can avoid late payment and reduce the risk of bad debt.
Late payment is costing businesses in the UK billions each year.
Recent figures from Bacs Payment Schemes Ltd, the company behind Direct Debit, showed that small to medium enterprises (SMEs) are owed a total of £14.2billion.
The statistics from Bacs show that of the 1.7million SMEs in the UK, around a third wait longer than agreed terms of payment.
Companies must spend time chasing these payments, which have staffing and financial implications, and may even result in bankruptcy in extreme cases.
At Napthens, clients faced with the issue often report similar reasons for facing late payments. Here are our top five excuses for late payments, reported by Lancashire businesses:
- “I’ve not had the invoice.”
- “There’s a dispute with the invoice.”
- “There’s not a payment run until next month.”
- “There’s nobody to sign a cheque.”
- “I can’t afford to pay you until we get paid ourselves.”
To help ensure your business is paid quickly, follow these top tips:
- Know your customers – have you used them before? Ensure the invoice is addressed to the correct legal entity (some customers are not sure who they are to invoice and where to send them).
- Set appropriate credit limits (and keep to them!). Set clear terms of payment and review for persistent offenders.
- Chase the payment as soon as it becomes overdue.
- Deal with issues or disputes quickly. The quicker they are resolved, the quicker you will be paid.
- Don’t let debtors call your bluff. If you threaten legal action – follow it up!
Businesses facing late payment pressures should consult their advisers as soon as they can to prevent the issue getting out of hand.