As businesses start to return to some kind of normal, many are continuing to struggle with late payments.
The latest results from the Business Impact of Coronavirus (COVID-19) Survey (Bics) show that more than half of the businesses questioned had invoice payments outstanding. The Office for National Statistics data indicates that 54% of those companies who had not permanently ceased trading were owed money from customers.
Late payments were an issue for many companies before the lockdown. However, a growing number of businesses are reporting a decline in revenues as a result of the coronavirus restrictions. This means the late payment of invoices is becoming increasingly concerning.
The ONS data highlights that 47% of businesses have seen a decrease in their revenue. For 9% of those questioned this is at least 50% below last year’s level.
These survey results are backed up by the Sidetrade Unpaid Invoice Tracker. This shows that, up till 22nd August, the average volume of unpaid invoices that were more than 10 days late had increased by 25% compared to before the pandemic.
Effective credit control
In order to get on top of their cashflow, companies need to focus on their late payments and target particularly crucial clients. The Bics survey indicates that 9% of businesses put themselves at a moderate risk of insolvency, with 1% classifying their company at severe risk.
Often the biggest catalyst for a company to fall into insolvency is a problem with their cashflow. Unfortunately, business owners often leave customer debts too long, believing that they will pay up eventually. However, the longer a debt is left unpaid the harder it will be to recover the money.
The best way to reduce the problem of late payments is to have an effective credit control system in place from the beginning. When you start working with a new client, putting these practices into place, including payment terms and conditions, will ensure both parties know what they’re working towards.
Reducing late payments
Even a company that has a spotless credit control process will still find the odd client that won’t, or can’t, pay on time. Where this happens don’t leave it too long before you start chasing up the debt.
It’s a good practice to make contact with a customer as soon as the invoice becomes overdue. This allows you to monitor the situation and deal with any issues they may have. If a customer has a short term cashflow problem, you may agree to give them longer to pay or a payment plan.
However, it’s important not to become too friendly with customers and to see it as a business transaction. Businesses can be caught out when a client goes into administration, owing them large sums of money.
Where necessary, late payment charges and interest can be added onto invoices to help with debt recovery costs. The use of a third-party debt recovery company shouldn’t just be seen as a last resort. Often, bringing in a professional debt collection agency can result in the invoice being paid quickly.
At CEA Limited, we work with companies of all sizes and across a range of industries to enable them to recover the money they’re owed. We act professionally at all times, maintaining the relationship you already have with your clients, but swiftly getting your debts paid.
To see how we can support your credit control, contact our debt management team today on 0113 532 8350 or email office@cealimited.co.uk.
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