We all know healthy cash flow is the life blood of any business. Cash flow has been named as one of the single most important factors in avoiding business failure. The results from recent research has have highlighted that small to medium business in particular are struggling to get payments both from their clients and customers, and suppliers and B2B partners.
The national late payment debt stands at £30.2 million!
According to the research, small companies in the UK are now finding they have to wait an average of 38 days before they are paid. Larger companies are the main culprits and causing the greatest problems to SME’s as it was found that rather than adhering to set contracts and agreed payment terms they tend to choose when they want to pay up. Sound familiar?
With the national late payment debt standing at an enormous £30.2 billion it is not a surprise that many SME owners have reason for concern. It states that, on average one in ten small businesses are waiting for £50,000 in payments (and almost half confessed that this amount, would be enough to put them out of business)!
The results of research also highlighted that there was a large difference between north and south. It would seem if you live in the north you are likely to be owed an average of £53,000 at any one time while in the south it was more likely to be nearer £27,000.
So what can you do about it?
Get to know your client & manage the blips
Dealing with late payers is never easy. You might not want to rock the boat, especially when the global recession means you’re sharing the same berth. Equally, it’s rarely advantageous to sour good business relations for what could be just one late payment.
So keep a close eye on how payments are paid. A one-off may be inconvenient, but manageable. Try to work out a pattern. And if you’re in regular contact with your client, you may even know the reason for the delay.
If you know your client well and go out of your way to make frequent contact the next step will be a lot easier. If it is a one off issue, a quick friendly prod in the form of an email or a telephone call will often do the trick.
Cant pay or won’t pay?
This is important. And finding out may not be easy but confronting this issue will be a great deal easier if you do Even better if your business relationship is already on a sure footing and this will open up a new gateway for negotiation. If the client is struggling with making payment and ‘can’t pay’, then more flexible agreements can be set up so that you receive all that is due, without bankrupting your client.
Put it in Writing
Make it clear what has been agreed and document the terms. If negotiations fail (or are not met again) you will need to then make it plain that unless payment is made within an acceptable period you will have to take legal action. Documented evidence at this stage will make things far simpler should things not progress as you hope.
Taking matters down the legal route
Approaching your client in a polite but firm manner as outlined above in the first instance is especially important because, if the worst comes to the worst, and you need to take things down the legal route, you will need to evidence to the court that you have made all reasonable attempts to recover monies owed to you.
The idea of going to court and the thought of the amount of money involved in taking your case through the court can be quite daunting. But there is now a much more simple method. Make your claim through Money claim online which is a facility offered by HM Courts and Tribunal service and, if successful you will be able to claim for interest as well as any administration fees involved in the recovery of your debt.