Nearly all businesses are feeling the pressure of the current economic climate with its tone of increasing financial uncertainty. The term ‘credit crunch’ has become an all-too-familiar term for all of us.
With a firm stranglehold on the available expenditure of any business, ensuring bills are paid on time has never been so important, yet a recent survey by NatWest highlighted that 71% of UK small and medium sized enterprises (SMEs) have suffered from late payments in the 12 months leading up to the study.
The research also found that a staggering £63bn remained unpaid beyond the agreed deadline and that £15.7bn of this was more than 120 days overdue, potentially threatening the survival of those SMEs.
The excuses are all too familiar. Businesses are told ‘the director who signs the cheques is away’, ‘our systems are down’, ‘we can’t locate the invoices’. Some businesses still report the old standby, ‘the cheque is in the post’ and the more modern – ‘our computer is down’.
We are all aware that clients are often a little economical with the truth but we are cautious about dealing with it for fear of upsetting a potential customer. But the question we must ask ourselves is do we want the type of clients who don’t pay on our books.
Financial planning is key. You need to put in place a system with simple checks that support your business. These can be simple things like making sure you credit check new clients and agreeing financial terms that suit your business and not just your clients.
Making sure that simple housekeeping procedures are implemented in the beginning can save headaches further down the line. Ensure you have signed terms of business from your client and revisit these regularly to make sure they’re kept updated. If you don’t have the full mechanism of an Accounts Department within your Company then invest in some affordable accounts software that will allow you to keep on top of your clients and your invoices.
There is no point in generating invoices unless those invoices are paid by the client otherwise they are nothing more than scraps of paper.
Every day businesses put off chasing their clients is another day that their business has to survive without income due and owing to it. Leave it too long and you risk not being able to recover the money at all.
Keeping your business on course to meet its growth targets is imperative.
Hillyer McKeown has launched an awareness campaign ‘Cash is King’ to assist businesses with setting up their systems as well as offering a fixed-fee debt recovery service.
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