Late Invoice Payments Putting SMEs at Risk of Insolvency
Research has found that almost a quarter of SMEs in the UK are facing severe financial difficulty due to the late payment of invoices. This could ultimately be putting them at risk of insolvency (i.e. going bust).
The research (conducted by Tungsten Corporation) found that, on average, SMEs are owed almost £41,000 in unpaid invoices. There are about 5.2 million small and medium sized businesses in the UK which means that the total amount owed to SMEs could be over £210 million.
Almost 25% of the businesses in the survey indicated that the issue has become so bad that they are at risk of having to close down their business. The tech sector in particular is facing problems, with 32% feeling the effects of late payments.
How to fix the problem of late invoice payments
There are a number of ways that SME owners can try to reduce the problem of late invoice payments, including:
- ensure customers are aware of your terms for invoicing – including any penalties that may apply for late payments
- make sure that you are asking for the money you are owed – many business owners are too busy or find it too uncomfortable to ask their customers for what they owed. (You have done the work, so it is the late payer who is being ‘rude’ by not paying you.)
- set up procedures for chasing any late invoice payments – including reminder letters/emails and phone calls
- as difficult as it might be, sometimes you will have to charge (or threaten to charge) penalty payments. Whilst you don’t want to upset customers, you need customers that are going to pay you for the work you have done!
- ‘e-invoicing’ processes will issue invoices and reminders electronically when they are due, making the process quick and easy – and (hopefully) reducing the need for any awkward conversations with late paying customers.
SME owners need to make sure are in control of their invoice payment system to ensure they have a healthy cashflow. If they don’t, they are risking becoming insolvent (i.e. going bust).
If you are a business owner and your company is struggling with the effects of late invoice payments, contact Clarke Bell now for expert help.
You will get free advice on the best solution for you.
Call 0161 907 4044 or email [email protected]