We were interested to read Worldpay’s research on late payments. They surveyed 1,000 owner-managed businesses and found that over 75% had experienced late payments in the last 12 months.
More worrying was the fact that the respondents said late payments were a growing problem, worse than previous years.
With nearly half of owner-managed businesses experiencing cash-flow problems as a result of late payments, the research poses a stark warning to all contractors and consultants; keep a close eye on payment from your clients.
Is late payment just a part of being a small business? Over 50% of owner-managed businesses seem to think so. We think that this is a worrying trend and the Government agrees. In 2013 the late payment legislation was amended to ‘aims to make pursuing late payment a simpler process across the European Union’ and ‘reduce the culture of paying late and making paying on time the norm’.
The revised rules are simple; debtors are forced to pay interest and reimburse reasonable recovery costs of the creditor if they do not pay for goods or services on time (that’s 60 days for businesses and 30 days for public authorities). We think that this is a great step forward, but evidence from the Worldpay study shows that late payment issues are on the increase.
So what can you do about late payments?
This threat affects every business in the UK, but there are simple steps you can take to reduce the risk and manage late payments when they occur. At inniAccounts we understand the detrimental impact they can have on your business’ cash flow so we’ve produced two helpful guides; one to reduce the risk of them happening and one provides advice on how to handle them.
Invoicing – ensuring your company gets paid provides sound advice on how and when to invoice clients. The article explains the importance of:
- detailed and accurate invoices,
- timing to hit payment runs,
- getting to know your client, and
- tailoring your billing to the client.
All of these measures reduce the risk of late payments as your client billing is as effective as possible.
Managing late payments provides help should a late payment occur. It gives detailed information about how to deal with late payments and clients that fail to pay. The article includes:
- the importance of being proactive in managing a late payment,
- ensuring your payment terms are not just a clause in a contract but on each and every invoice,
- how and when to chase payment,
- what fees and interest you can claim under the late payment legislation,
- how to secure reimbursement when the client refuses to pay, and
- resources to instigate legal proceedings when all else fails.
Both articles are a must-read for contractors and consultants. Being proactive and prepared will enable you to minimise late payments and ensure you have a robust process in please should this common issue affect your business.