Research produced by Bacs confirmed what many small business owners already knew: that the economic downturn has increased the number of companies taking longer to settle their debts.
The organisation revealed that 30% of small companies have seen the late payment problem exacerbated in recent months, with 28% saying they now spend even longer having to chase outstanding debt.
But as well as being among the worst affected, small businesses and sole traders are also the main culprits, the survey revealed, with 44% blaming individuals and 41% pointing to small businesses. This compared with just 34% saying large corporates were to blame.
Bacs offers the following tips for small businesses on bringing the money in:
-
Encourage all trading partners to pay invoices
by Bacs Direct Credit. Include your sort code and account number on invoices
along with the message "pay me direct." This small step can save time on
payment reconciliation and queuing at the bank to pay in a cheque which in turn
can have a positive effect on cashflow
You are legally entitled to add statutory interest to overdue invoices and can also claim reasonable debt recovery costs if it gets to that stage
- Late payment legislation has been in place for over 10 years so why not use it? You are legally entitled to add statutory interest to overdue invoices and can also claim reasonable debt recovery costs if it gets to that stage
- Save your own suppliers time and money by paying them using Bacs Direct Credit. Once you have a reputation for paying late, your suppliers may not be so keen to work with you next time around
- Arrange to pay your regular business bills by Direct Debit. This way you'll know that the payment is being made each month, reducing the risk of incurring your own late-payment charges
- If you have prompt payers, why not reward them so they continue exercising good practice? Consider offering early-payers discounts encouraging them to keep the money flowing in
The research also revealed that over half (58%) of small companies had been affected by the economic downturn, although 45% of small firms in the north of England said they had seen no visible evidence of the slowdown.