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SME’s late payments are still an issue

SME’s late payments are still an issue

Having unpaid invoices can be SME’s worst nightmare as they desperately need to maintain a healthy cashflow. According to the Federation of Small Businesses, late payments forces around 50,000 businesses to cease trading every year and this costs the economy an estimated £2.5 billion. This is a problem that cannot be ignored. According to a survey by an accounting software company called Sage, 17% of all the payments in the UK were made late and eventually 9% was written off as bad debt.

Late payments can damage every aspect of a company- 40% of SME’s said that they saw a direct, negative impact on their own business as a result in the late payments from debtors. However, others reported that this lack of cashflow forced them to a delay with investing in their company and looking for ways to support their ambitions to scale up to 25%. As well as this, late payments meant that SMEs were often left unable to pay their own suppliers which creates a vicious cycle.

 You can minimise the issue of late payments by enabling digital payments. When you are confident that your invoices will definitely be paid on time, you can get a better forecast of your company’s cashflow in upcoming months, it’s also important to make it as easy as possible for your customers to pay you. You can make the process of enabling digital payments quick and simple by looking for accountancy software that enables recipients to pay immediately. Another way of minimising late payments is by setting up automatic reminders by using an online task tool so that you can chase payments a few days before its due and you can keep chasing it until it is paid.

 Being proactive and intensive is a way of acting early and chasing late payments as soon as possible. You can also incentivise suppliers and customers to pay on time. A possible option could include offering a discount for early payments. This means that they are rewarded and more likely to do business with you again in the future.

 A way of minimising the issue of late payments is by having a clear credit policy. When offering credit, you have to be clear on how much that might be and when you will be offering that option. However, you also need to think about when you would consider a payment to be overdue. All of your customers and suppliers must be aware of the credit policy. It should also be written out before each sale.

 As a company, you also have to nurture and maintain great working relationships with anyone involved in the accounting and finance side of the businesses that you are invoicing on a regular basis.

Late payments can affect your SME’s working capital, but business owners can maintain control over their cash flow with a reliable and flexible alternative finance faciality.

Added: 12 Sep 2019 14:45

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