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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.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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Making You Content
Making You Content
27th January 2015 9:34 am

The first time I work with a client I ask them to pay upfront, or at least half of the payment. Usually, I then move onto weekly invoices, and if they are reliable at paying promptly eventually I’ll move onto monthly. Chasing payments is always an awkward task though!

theaccountancypartnership
theaccountancypartnership
27th January 2015 10:32 am

Good advice 🙂 It can be awkward, but I think if you make things clear from the start or incorporate it into a contract of work it helps (late payment penalties). Also a good invoicing software is ideal to automatically send out reminders!

Making You Content
Making You Content
27th January 2015 10:33 am

Great tips, thanks!

Florian Reinhardt
Florian Reinhardt
27th January 2015 12:57 pm

Absolutely true! We found that an automated reminder process increases efficiency tremendously! Key is to send the first reminder a few days before an invoice becomes overdue. This decreases the risk for an invoice to age significantly.

theaccountancypartnership
theaccountancypartnership
27th January 2015 1:08 pm

Yes good point, get the first one in early! It also helps with getting a client in a ‘routine’ when paying, if it’s a recurring monthly payment.

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