The issue of late payments has been a long debated topic amongst business professionals and CEOs. Whilst the current economic climate continues to hit the private sector hard, the added pressure of avoidable debt is an unwelcome factor. The latest Project Merlin figures show that small businesses in particular are still experiencing difficulties in access to credit as lending experiences another shortfall.
In a recent survey by Hilton-Baird Collection Services only 18% of businesses claimed that they had experienced no delay in payments from their own customers. This is a worrying statistic, especially during a time of economic uncertainty. What is more alarming is the fact that only 1 in 4 would consider implementing additional interest on late payment amounts. However, many companies that took part in the survey said that they are going to, or have, implemented certain procedures and operations to deal with the issue of late payment.
The majority of businesses chased up unpaid invoices by constantly reminding them using phone, email and letter. Others went as far as getting a solicitor involved to write the professional letter, however this was defined to extreme circumstances where the debt due was of a large amount and the delay in payment had spanned over a long duration.
Other measures included suspending work or services until the debt is cleared. This is a particularly beneficial strategy to use, especially if a trusting and reliable relationship has been created between the company and the customer. Out of the 683 businesses who were surveyed, 70% of them claimed that this process was either already in place or about to be implemented.
One measure that is commonly overlooked is that of customer credit a check, completed prior to the agreement being confirmed. Whilst this may seem the ideal solution and a realistic plan for the future, a number of businesses commented that they would feel uncomfortable following this procedure.
It is not surprising that the main reason behind the issue of late payment is that customers were waiting for payments from their own clients. This domino effect can cause unfortunate outcomes for those companies involved. Insolvency and debt management plans are fast becoming common occurrences for small businesses, especially those who operate in the construction sector.
Although companies are attempting to find new ways of controlling their credit, the issue of late payment is still well and truly upon small businesses. For CEOs and company directors, the need to implement further measures to hit this problem head on has never been more pressing. Despite the doom and gloom that the recession has caused, good spells are almost certainly around the corner is a heightened sense of credit control can be achieved.
This is a sponsored guest post by Nicola Winters on behalf of Cooper Matthews, who offer straight forward insolvency advice for businesses who are struggling financially, including IVAs, CVA.s and pre-pack administration.