Bad news – late payments to small and medium businesses have shot up by 40% from last year.
Compared with this time last year, when £18.6bn was owed to small and medium sized enterprises (still not exactly small change), they are now owed a staggering £25.9bn.
The national average for outstanding payments now stands at £53,200. Businesses in the Midlands, though, have been worst hit, with an average of £69,000.
"Late payment and bad debt are the scourge of business owners. Often, they are major factors behind businesses being forced to close," saud Phil McCabe, spokesman for the Forum of Private Business.
The research was carried out by Bacs Payment Schemes Limited (Bacs). It also found that the number of businesses owed money is up almost 10% (from 51%).
This is all despite the Better Payment Practice Group (BPPG) year-long national campaign ‘Collect the Cash’, which launched last November.
The ‘Collect the Cash’ initiative was meant to “encourage small businesses to make trade credit management and debt collection their number one priorities.”
"The problem has intensified as a direct result of the credit crunch and economic downturn, as credit from suppliers has increasingly dried up," McCabe added. "With the knowledge that prompt payment can mean the difference between trading profitably and trading at all, many small businesses are now looking to the year ahead with considerable trepidation."
So here’s a few tips on how to deal with late payments.
First, take a look at Smarta’a guide on late payments.
(If things get serious, this one on the small claims court might also help).
And here are the three basic steps that can really make a difference:
1. Run a credit check on new customers – Companies House can carry this out for you, for a fee
2. Don’t be shy about chasing invoices – start doing it early. Get off on the right foot is by calling as soon as the invoice has been sent, to check that it's been received - you can then politely ask when you can expect payment, which will act as the first reminder (thanks to marktj, below, for this tip).
3. If someone pays late, remember that you are legally entitled to charge interest. And tell them that. If they know the amount of money they owe is going up by the day, they’ll be keener to get it out of the way as soon as they can