According to research by Bacs Payment Schemes Limited (Bacs), the United Kingdom’s smallest businesses are facing a bill of £6.7 billion, up from £2.6 billion in 2017, to collect money that they’re already owed. It is estimated that the cost of recovering overdue money is on average £9,000 per business.
The most troubling part of this research is that over a third of small-to-medium sized enterprises facing late payments have reported waiting two months beyond agreed terms to be paid. This is a staggering 100% increase on the number of businesses that said the same in 2017.
Consequences of late payment
When small businesses are forced to wait long periods to receive late payments, this creates a ripple effect. These businesses often experience cash flow issues which in return leaves their suppliers and providers facing late payments. Cash flow and the ability to invest is crucial to business growth, and without this, businesses cannot expand and flourish. In some instances, this is so serious that it can force the business to close entirely.
How to combat late payment
It can be difficult for a small business to find the time and funds to combat late payments. Bacs have reported that small businesses spend around £4.4 billion in administration costs alone chasing payments. It has also been reported that a staggering 11% of small businesses struggling with overdue invoices have had to employ someone to chase for payment, creating further costs on top of the administration costs.
To combat late payments, small businesses would be best advised to adopt their invoice process in the following ways to avoid late payments:
- Ensure that payment terms are made clear on all invoices and communications regarding payments;
- Ensure that invoices are sent out in a timely manner at month end;
- Ensure that customers are aware that failure to pay an invoice will result in late payment interest accruing;
- Ensure that customers who have failed to pay within the agreed terms are made aware of this immediately.
Capital’s debt collection service
Bacs have reported that small businesses faced with late payments find themselves spending on average £9,000 per year recovering fees. Often, these astronomical fees do not result in recovery as the tight margins created by the initial late payment means that small businesses face pressure in meeting the cost of their legal fees.
Here at Capital, we have designed a service that saves you time, fees and looks to get your money back – plus interest and compensation – as quickly as the same day.
We don’t use automated systems and we look at your problem from all angles before deciding how best to go about it. And, you don’t have to pay anything or take on any risk: when your customer pays up, they pay us, too.
We have experience of recovering debts up to six years old, tightening up trading terms, improving aged debts and saving credit insurance premiums. We work with businesses of all sizes to collect debts of all sizes: from single debts of as little as £100 to complete debtor ledgers, worth millions.
If you are facing regular late payments, get in touch with us today.
