Half of invoices continue to be paid late
New research has been carried out using cloud accounting software Free agent into the payment of invoices to Freelancers and micro-business owners from large companies.
This became a big issue that was highlighted recently with the closure of Carillon and the affect that snowballed down the supply chain.
The research shows that large business continues to pay their supplier chain later than agreed with resulting knock on affects causing financial distress.
- UK-wide, 52% of invoices sent during 2017, were paid on time or within three days of their payment deadlines.
- 26% of UK small / micro businesses said that the longest they have had to wait to get paid by a client was three to six months,
- 10% of businesses have a client who has never paid them at all.
CMG UK’s Managing Director Jenny Esau states, ‘SMEs need to have a credit management strategy in place that would drastically reduce late payment and protect profit from bad debt, all the while keeping your customers happy with the service you provide.’
I’m sure many businesses have an interest clause within their Terms and Conditions in regards to late payment. I’m also sure that many businesses never take full advantage of late payment interest due to fear of damaging a relationship with a customer, or simply that they don’t know how to effectively apply it.
Having a late payment interest clause in your T&Cs is a must for any business, but I would highly recommend aligning any late payment interest with Late Payment Legislation. This allows you to charge 8% above Bank of England base rate (a fairly substantial figure which is meant to be punitive, not compensatory), but it also allows for compensation and third part debt recovery fees to be added to a debt.
Our Improving Collection Performance training provides you with the knowledge and know-how of applying Late Payment Legislation as well as many other effective credit management strategies, book your place today.
