Small Business Tips To Tackle Late Payment Culture
Small businesses employ more than half of all private sector workers and together they contribute more than 50% of total UK GDP. As a major driving force of the economy, the government has recognised that we need measures in place to protect small businesses from the harmful effects of late payments.
Research from FSB shows that 37% of small businesses have run into cash flow difficulties, 30% have been forced to use an overdraft and 20% cite a slow down in profit growth due to late payments (you can read the full article here)
To help combat the culture of late payments, in 2015 the UK Government passed the Enterprise Act and created the role of the Small Business Commissioner. The Commissioner’s duty is to ensure fair payment practices for Britain’s small businesses and support them in resolving their payment disputes with larger companies.
The Enterprise Act also introduced the Duty to Report in April 2017. Under the new regulations, large businesses are required to publicly report the average time they take to pay their suppliers. This information then lets small businesses make better decisions about which organisations they want to work with.
How can you stop late payments affecting your business?
As a small business there are steps you can take to ensure that you’re not affected by late payments. Below is a list of some of the actions you can take to avoid late payments.
- Before you undertake any work, setout agreed payment terms in writing. This way both parties know what to expect before it comes to the payment date.
- If you know that you need the money within a certain time period, set your payment terms earlier. Many payments are often delayed or overdue so this means it won’t affect your cashflow.
- Where possible send e-invoices with read-receipts so you are always sure that the invoice has been received and opened.
- Don’t delay when sending invoices out. Invoicing for the work completed or goods provided should be one of your top priorities.
- If payments are late chase them up as soon as possible. The longer you allow an overdue account to lapse the harder it will be to chase the payment.
- Finally, make sure your invoices are accurate and easy to understand. This reduces the amount of mistakes and misunderstandings that cause late payment.
Sage 50 accounting software
Need help staying on top of your business accounts? Our Sage 50 Accounting software is available with a subscription option or under a perpetual licence. Sage 50 will automate many of your payment procedures and always ensure that invoices are accurate and easy to read. Sage 50 Accounts will lighten your workload and help your business avoid late payments by using reports you can see which customers owe you money.