UK businesses are still experiencing difficulties with late payments, according to a report issued by Sage, a business software provider. The annual study has revealed that although the situation has improved slightly, large numbers of small companies are still having to deal with payments coming in after their due dates.
Most companies don’t receive payment within 30 days, according to the annual report, with 60 per cent of firms waiting more than 60 days. The report surveyed 457 UK small businesses and discovered that nearly half of them had to wait over 90 days for payment. However, the figures indicate a slight improvement, as last year more than half had to wait for their cash. According to Sage, the continuing trend is affecting the cash flow of small firms in the UK.
Late payments are inflicting serious cash flow problems for 12 per cent of companies, while a further 12 per cent were finding it difficult to meet their own supplier costs due to the problem. Some companies are experiencing more serious difficulties, with three per cent unable to pay their employees and two per cent being unable to meet the costs of overheads.
Although the Prompt Payment Code, introduced by the government, has improved the situation slightly, the report demonstrates that there are still too many small companies waiting for payment. Large businesses are providing extended payment terms, according to some small firms, with some giving an extra 30 days or in some cases, an extra 45 days. Only eight per cent of respondents believe the Prompt Payment Code is effective, while just over a quarter hadn’t heard of the initiative.
How can you encourage clients to pay promptly?
Ensure that you spend time sending out invoices so that customers receive notice for payment as soon as they receive their goods or services. Make the payment terms clear and include the penalty for late payment. You could offer an incentive for prompt payment, too.
Managing late payments
Make time to keep track of invoices and payments, so that you know what is outstanding at any time. Rather than waiting for late payment, contact clients as soon as the due date has passed so that, if it is a matter of a simple oversight, the payment will be made.
Managing cash flow is time consuming, which is why it is regularly outsourced. Got any tips for encouraging prompt payment? If so, let us know in the comments below, or get in touch with The Accountancy Partnership.
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