How Small Businesses Should Tackle Late Payment
Late payment is a persistent problem for small businesses. Despite the existence of late payment legislation, that has been in place for some time and designed to protect SMEs, many small businesses still remain extremely reluctant to go down the legal route when waiting for invoices to be paid as they simply do not want to risk relationships with larger firms in the hope that unpaid invoices do not impact on their cash flow too seriously.
“This way of thinking may work when times are good but a different approach is needed now that the economy is still unpredictable,” said Gerald Irwin of Sutton Coldfield-based Licensed Insolvency Practitioners and Business Advisers, Irwin Insolvency.
With the failure of thousands of small businesses blamed on late payment issues each and every year, the recent economic crisis has made credit control problems even worse as the availability of credit shrinks and loan costs rise.
“Late payment should never be tolerated and can be tackled head on with the introduction of an effective credit control system. Too many businesses are paying late to sustain their own cash flow and undermining their suppliers in the process and there is a need to get tough on this practice which should include credit checks on new and existing customers, offering incentives for prompt payment and making customers aware of their obligation to pay invoices within the agreed period,” said Mr. Irwin.
On average, small businesses are owed £2,000 at any one time.