Research by Bacs indicates that 60% of UK SMEs experience late payments, with the average business owed over £38,000 and corporates almost £1 million. To prevent increases in overdue payments, businesses can take control of their collections to positively impact cash flow, reduce the high overheads associated with debt collection and improve financial control.
A third of businesses are spending £500 each month as staff spend time chasing late payments, and companies incur additional borrowing charges while they bridge the funding gap. Ignoring late payments could have detrimental effects, with research showing that 1 in 4 SMEs would be pushed into bankruptcy if the debt grew to £50,000.
What steps can businesses take to protect themselves from late payments?
- Run ‘Know your Customer’ credit checks and build up a good customer relationship
- Confirm your payment terms in writing and check that customers have agreed them
- Ensure you have rigorous invoicing and credit control procedures in place
- Encourage customers to pay via Direct Debit by offering incentives.
By taking control of how your customers pay you with effective Direct Debit management, you will be able to encourage prompt payments, deliver predictable cash flow and improve financial control.