At any one time, 78% of small businesses are owed money (accountancyage.com). Cloud accounting software specialist, Xero, reckon that this could amount to nearly £30,000 on any given day. Xero call this the Late Payment Cash Mountain - and the knock-on effect could be catastrophic. Any and all small businesses can suffer, and in turn their suppliers, and so on, until it becomes a vicious circle… a domino topple of debt.
Cashflow is crucial to small businesses. Concerns over cashflow spawn doubts over investment, recruitment, training and virtually every aspect of business. Not just of growing and developing that business, but simply functioning on a day-to-day basis.
With small to medium enterprises responsible for almost half of GDP and over half the population working within a small business, the impact is felt by more than just a handful of micro businesses. The wider economy takes a knock when small businesses are struggling to get paid and in turn to pay their own suppliers. It’s yet another vicious circle.
About 50,000 businesses go to the wall each year citing cashflow problems. How can businesses make sure they get paid – and on time?
First up, terms and conditions should be crystal clear when it comes to invoice terms – and require an acknowledgment. Make it simpler for people to pay to really speed things up. Countless companies specialise in systems to streamline the payment process. Credit control programmes can also take a headache away as many small business owners and their staff are still uncomfortable chasing money. Automated invoice reminders can give a helpful nudge to the genuine forgetters.
No More Excuses
Are they STILL not paying? It’s time to play hardball – no more excuses, believable or otherwise:
The Cheque’s in the Post
The ultimate old chestnut, right up there with ‘the dog ate my homework’. Do people still use cheques? If so, they must provide at the very least a cheque number and the date it was – allegedly – posted. If accepting cheque payments, insist on 1st Class Recorded Delivery. Make it one of those t’s and c’s.
If the cheque was – allegedly – posted more than a few days ago, it’s perfectly reasonably to request another (send first class recorded) and suggest the debtor cancels the – alleged – original as lost.
Sending and receiving cheques is inconvenient and clunky. BACS is the way forward.
We Don’t Operate That Invoicing Timescale
No? Well, we do, as was made clear from the outset in the terms and conditions which were accepted and acknowledged (hopefully. Give yourself a stern talking to if not - and update accordingly…)
Providing those terms and conditions were indeed clear and acknowledged, cite the Late Payment of Commercial Debts (Interest) Act 1998, which states they could incur interest charges.
That Invoice is Missing
Lost invoices are almost up there with posted cheques insofar as old chestnuts go. Digital bookkeeping and accounts should negate this excuse totally. Failing that, a clear paper trail is essential and brooks and arguments. Either way, it’s imperative to ensure that invoices are directed to the right person or department.
That Invoice Hasn’t Been Received
Again, many small and micro business owners hate asking for money and unsent invoices account for just under half of all late payments. It’s YOUR money. You’ve supplied the product or provided the service – you need to get paid. It’s a simple equation. Again, digital accounting software can depersonalise the process and free you and your staff to do what you’re good at.
The Accountant is Away
No. Just no. Businesses continue to operate no matter who is on leave. Even if it’s the financial director, there will be systems in place to ensure the finances still flow. Speak with another manager or director and if necessary, offer alternative payment methods. Annual leave or not, they won’t be happy at suppliers pulling out or interest being accrued.
Who Authorised This? We’re Not Paying…
Robust terms and conditions and signed contracts can avoid this kind of freeloader. Don’t accept any further orders from this client and seek urgent advice from a debt recovery specialist.
Still Not Paying? No More Playing Nice…
As well as statutory interest, debt recovery costs can be claimed from non-payers and late payers. Ensure this eventuality is mentioned in those t’s and c’s – and don’t just threaten it, action it. It’s time to call a debt recovery specialist like nationwidedebtsolutions.co.uk who can even work on a No Win No Fee basis.
Have you heard some cracking excuses and even more ancient old chestnuts from late payers? We’d love to hear about them. Drop us a line on firstname.lastname@example.org