- Over a fifth of SME's (22%) have declined future business from customers in 2012 in an attempt to tackle late payments.
- In total, UK SME's are currently owed more than £36 billion in late payments
Source - Barclays Research: tinyurl.com/d9fvelk
The research also reveals that the impact of late payments on decision makers is often significant with nearly a third (30%) of respondents, who have experienced late payments in the past two years, having to use personal money or assets to boost their cash flow. A fifth (20%) of respondents have suffered extreme stress as a result, and some cases (11%) late payments have nearly caused a business to fail.
In a recent publicised case a glazing company said that it would sacrifice 40% of its turnover rather than carry on supplying Balfour Beatty, because of the constant struggle to get paid. Unfortunately for most companies this just isn't possible. SME's simply have to grit their teeth and put up with it rather than lose their customer.
The truth about late payments
BACS estimates that a number of SME's facing late payments in over £1m with a total debt of £36 billion! The average owed is over £35k. Over a third of people responding to the BACS survey stated that a late payment of £20k would be enough to put them under.
"Do you know who we are?"
That was the response one member of the FSB got when she chased their biggest unpaid bill. Their view was 'we are in control. We will pay when we are ready. You just have to put up with it'. They felt they could simply walk all over the company. As you can imagine the implications are massive.
Another FSB member surveyed stated that he once got told by a late payer "are we wasting our money paying you? Are you going to be around to finish the job?". This verges on criminal.
Another 'joke' is when a late payer will demand a percentage off - often as much as 20% - if they pay on time. Again, criminal. On a lighter note I do know one company who tried this with someone. The response he got was "well sir we'll simply cut off your electricity". It with EDF.
We ourselves have had to put up with late payments. Such things as ignoring our 30 day payment terms and telling us that they will pay using their payment terms. Often as long as 60 or even 90 days AFTER. This is like walking into Waitrose and telling the cashier that you'll pay for your food when you decide. If you weren't rugby tackled to the floor by security before getting to the car park I would be amazed. Luckily we simply turn their payment system or website off and stop them from trading and making money. Luckily this is rare... but does happen.
In 2001 I was on a training course about operating and running company financial accounts, and we were joined by a large construction company. The managing director, very smugly I may add, stated that "we often won't pay small companies so they go out of business and we get the work for free". I have to say several people had to be pulled off him. Myself included.
Top tips to help fight against late payments
1. Revise your trading terms and make sure companies you trade with know them
2. Carry pout credit and other financial checks on a company before doing business
3. Set a maximum credit limited
4. If a company is limited, consider asking for personal guarantees from the directors
5. Always provide written terms and make sure they are agreed
6. When sending out an invoice make sure it is clear and goes to the right person.
Learn more about our merchant account and gateway system at www.web-merchant.co.uk
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