Late Payment Crisis

Jenny Cooper on Jun 1, 2021 10:00:27 AM

In recent conversations with customers about the business challenges they are currently facing, a common theme is the issue of late payments.

  • An Office for National Statistics (ONS) survey has found businesses are continuing to struggle with over half (54%) of businesses saying they were waiting on late payment of invoices as a result of COVID-19.
  • And the Federation of Small Businesses (FSB) research shows the majority of small businesses hit by late payment as a result of COVID is seriously stifling cashflow. Their report shows that those in public sector supply chains fare no better than those that sell to other businesses.
  • The FSB has campaigned for good payment practice to become the norm across the UK economy, and the good news is that a recent overhaul of the Prompt Payment Code was announced.

Be that as it may, we understand that waiting for invoices to be paid can seriously impact cash flow. If you need support and would like to speak to us, please contact the Business Relationship Team.

Tips for managing late payments:

  • With a bit of planning, you can improve and manage your cash flow so that you’re covered for slow periods before they even happen. Manage your debtors by monitoring and chasing invoices as they become overdue. By implementing credit control processes, procedures for chasing payments, and penalties for late payments, you will educate your customers that paying on time will have a beneficial impact – you won’t be chasing them on a regular basis and they will also avoid late payment penalties.
  • The use of cloud-based accounting can also help you to minimise late payments. Systems such as Xero, Quick Books and Sage allow your invoices to be electronically sent to your customers, avoiding the phrase “I never received the invoice”! You can provide a pay now button to enable immediate payment and set up an auto reminder for unpaid invoices. However, a quick call to the customer can address any issues they may have in making payment; building a relationship with your customers’ accounts payable can be beneficial.
  • Providing your customers with clear payment terms and incentivising early payments will educate and encourage them to pay early or on time. This will also assist in building a strong working partnership for future business growth. Business is all about relationships!
  • The implementation of robust credit control process and procedures should see a significant reduction in overdue invoices, which will result in business confidence in cashflow forecasting.

While the best processes and procedures can be implemented and executed, there may remain occasions that late payments impact on cashflow and working capital so it always pays to be prepared.