For small businesses in the UK, the problems with late payments is a major issue, and not one that seems to be improving.
The average time for the payment of an invoice is currently around 72 days (so much for the standard 30-day terms). Moreover, the average amount outstanding on an overdue invoice is around £6,000. It’s not surprising then that for many small business owners, it’s the cause of many sleepless nights.
Blackhawk Intelligence provides Process Server Services in London and has witnessed a rise in the last year of the number of companies serving Statutory Demands.
Small businesses cash flow strangled
Adequate cash flow is critical to the smooth running of any business, big or small. If invoices aren’t paid, then there’s a knock on effect and often resulting in you being unable to pay other suppliers. There’s a distinct and real danger that the smaller companies lower down the chain can go out of business. That is not a good thing, not just for the business owner, but for the companies they were supplying. It reduces the pool of competitive services and may force companies to increase prices or reduce their own profitability to accommodate the changes.
Last week, Jeremy Corbyn promised that a Labour government would take action against larger companies that fail to pay smaller suppliers on time. Why should it take government intervention in what is essentially an ethical issue?
It’s an ethical problem
There’s no real excuse for delayed payments, unless of course the company in question has it’s own financial problems. Of the many causes of late payments, greed and tardiness stand out: greed that looks to capitalise on other companies accumulated cash; then there is bureaucracy and payment cycles which slow down the payment process in larger companies – for examples, the process of gathering many signatures and approvals required to get a invoice paid.
Legislation introduced four years ago in relation to the European Union’s Late Payment Directive, seems to have had little effect, in the UK at least. It seems that it’s too intimidating for smaller business to confront their larger clients.
Take proactive action through regular due diligence
One of the best ways that small businesses can protect themselves is to conduct regular due diligence before allowing your payers to accumulate their outstanding debts. It starts with running a credit check and getting references from them. Companies House can also be of help. Check the London Gazette to ensure no action is currently pending.
If all else fails, you can turn to expert investigators Blackhawk Intelligence for process serving and to help directly with the recovery of the debt, particularly if you feel that financial fraud may also be involved.