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Late Payment Problems

by Jo Shaer, on April 8, 2013

The average wait for settlement beyond payment terms is 43.4 days
Businesses are forced to spend up to 14 days every year chasing overdue bills
The average amount owed is £36,000

From First Voice, the FSB Magazine

I have just spent 30 minutes going through my bank statements and invoicing software to produce a document which confirms that my client has not made all the agreed payments. This is on top of the amount of time I have spent chasing the debts over the eight months. Late payment problems are starting to get on my nerves and interfere with my ability to do business.

It would seem that trying to help people by spreading payments over a period of six months actually shoots me in the foot in terms of the time it takes to administer such a scheme. The only option, if I am to continue with this process, is to insist that clients set up a standing order from the start.

There are clients who pay you a little bit here and a little bit there, often months after the original invoice and sometimes in amounts that pay off a bit of one invoice and all of another, making it almost impossible to monitor. Even by keeping regular records, you have an element of doubt when the client insists that they have paid more than your records show - so you diligently go back and check again.

These jobs end up costing more in time administering the debt collection than I make in profit and it's becoming impossible to sustain.

So, it was with great interest that I read the Special Report in the latest edition of First Voice, the FSB's magazine for its members.

The article highlights the case of Steve Paul, whose plastering business was forced into administration because his big customers refused to pay on time - even though they were being paid immediately at the source. We're talking hundreds of thousands of pounds here and a culture where big business thinks it is able to say 'Do You Know Who We Are?' and expect the smaller business to bow to their payment terms.

Karen Woolley, the FSB's Development Manager for Staffordshire and the West Midlands is spearheading a national project to highlight the problem and persuade the Government to blacklist those companies with a record of paying late.

Some smaller businesses are refusing to work with persistent offenders because it is better to give up what had been a huge proportion of their workload than to waste the time and money struggling to get paid. It was heartening to hear of one FSB member, Karen John, who challenged the attitude of one of her biggest customers by refusing to accept their lorries when they arrived until she had been paid.
She said: "You have to be proactive. Everybody gets a cash flow pinch and you can survive the odd one, but when your cash flow is constantly threatened by customers' payment policy, you have to make a stand."

The FSB's top tips to prevent late payment included:

Carrying out credit checks before accepting a customer.

Revisiting your terms and conditions to ensure they fit with the companies that you want to do business with and make sure that they are agreed up front - it's not enough to just put them on the back of - or as an attachment to - your invoice.

Set out what you are doing and when payment is due for each and when goods and services are provided, ask the customer to sign an acceptance form so there is less chance of a dispute arising later.

Ensure that the invoice goes out on time and to the right person - to avoid the possibility of delays. And ensure that it clearly states what has been done, the amount owed and when it is due.

Topics:women in businessSmall BusinessWomen and Small Business

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