Are your clients being left waiting?

Being forced to wait for payment is becoming endemic for UK businesses. The time UK SMEs spent waiting for late payments has almost doubled  in recent months, according to a report by MarketFinance.

It is a near universal problem for small businesses who depend on orders from large businesses – many of whom are guilty of sitting on cash for as long as possible to improve their own accounting position – at the expense of the small firms they keep waiting.

In 2018, the average late payment was 12 days behind schedule. By 2019 that increased to 23 days – and around £34 billion is owed in late payments to UK SMEs, an average of £34,286 per business. The Manufacturing and retail sectors were plagued with late payments, with around 50% of all payments arriving late.

Late payment practices harm your clients' cash flow, hampers investment and can prevent them from taking on more work because of these cashflow constraints. In extreme cases, it can bring businesses down. The Federation of Self-Employed and Small Businesses estimates that more than a third of all SMEs run into cash flow problems as a result of late payments. Just paying their staff and bills can be a problem if the cash required is still in the bank of a debtor.

You may even be a victim of late-paying clients yourself. The report showed that professional services suffered the most late payments out of all the sectors surveyed.

And it is not just a UK phenomenon. Firms dealing with international payments saw American firms as the slowest payers, taking an extra 51 days to settle accounts, German firms took an average of 32 days and Chinese firms were the most punctual at solving their late payments, on average settling within in 10 days.

Slow payment means lost time

It is not just a matter of the problems caused by a lack of revenue. Valuable time is being wasted too. UK SMEs, on average, spend more than a working week each year chasing after late payments, amounting to a total of over 56 million work hours lost a year. Every day an invoice is late means more time spent chasing payment, which means less time for your clients to focus on productive work, let alone growing their business, or coming up with new initiatives and bringing in more people.

The report estimated that the time wasted on chasing these late payments is worth £billions – and stated that, on average, at any given time an SME is waiting on nine outstanding payments and more than 10% of these outstanding payments are more than 200 days late.

The Federation of Self-Employed and Small Businesses said small businesses are owed an average of £6,142, mainly from larger firms. They also state that around a third have needed to use an expensive provision such as an overdraft to cover costs.

Are your clients suffering with late payments? Find out more about Invoice Finance to help your clients ease cashflow bottlenecks

What can be done to help?

Awareness of the late payment problem is growing, and there have been some initiatives to help. Last summer the government unveiled some initiatives which would hold debtors more responsible and encourage them to they pay for goods and services in a more timely fashion.

These include proposals for strengthening the powers of the Small Business Commissioner to hold larger businesses accountable when they are late on payments with small businesses. Possible new powers could also entail imposing financial penalties or binding payment plans for businesses found to have unfair payment practices.

Another is to have large businesses report their payment practices to a national database - allowing small businesses a chance to see if they can afford to do business on the terms the potential customer offers. 

But many of your SME clients will not have the luxury of turning down orders from large customers, even if those customers are known to be poor payers - and they may look to you for help. 

How you can support your clients?

Becoming the source of answers to all financial questions may be the way the accountancy profession is going. Simply preparing the accounts is - thankfully - becoming increasingly automated, and your role is clearly shifting from a compliance role to an advisory one.

But what advice can you give when a client comes to you with a late payment problem that is threatening to bring their business down? 

There are actually several solutions that you may be able to propose.

A Cashflow Loan may be one answer if the client is in crisis - but this may be a costly short-term patch for what seems to be a long-term problem.

For many clients, and especially those who operate in the B2B space, an Invoice Finance arrangement may be the most appropriate solution, providing prompt payment - and if required the support of a credit control team at no extra cost. There are, of course, many types of Invoice Finance and many providers - getting the most cost-effective solution for your client may be a major task for you.

Fortunately, there is a simple way to become an expert in Invoice Finance provision, simply by contacting us at Rangewell.

Becoming an Invoice Finance expert with help from Rangewell

At Rangewell we are business finance specialists. We help businesses of all kinds find the funding they need - whether it is from traditional sources such as the high street banks, or innovative new solutions from the alternative lending market.

Our expertise includes Invoice Finance. 

A call to us can get our experts working to find the Invoice Finance solution your clients need. It means that you can provide your clients with the answers they need to late payments. Our service is free for you and for your clients - in fact, we may even be able to provide an additional revenue stream for your practice.

Working with Rangewell is simple – we have a dedicated accountants partnership team for you to call – and you can have our nationwide resources working to help you grow your practice and help your clients find the business funding they need - including Invoice Finance.