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Are your clients chasing £50bn worth of late payments?

Published on 13th January 2020

A recent survey has shown that small and medium-sized British businesses are tracking down late payments worth more than £50bn.

The research suggested that SMEs - including your clients - are chasing an average of five outstanding invoices at any one time. They are owed an average of £8,5000 each - and spending more than an hour a day in the chasing.

A serious burden

It is a serious burden for your clients, and even sole traders are owed an average of £1000 in late payments.

Self-employed and working alone individuals are also facing a huge amount of late payments being owed, having an average of four outstanding invoices at any one time – nearly reaching up to £1,000. They claim to be spending an hour a day chasing these invoices, while medium-sized businesses are waiting for late payments in five figures.

Back in 2016, research led by the Federation of Small Businesses indicated that 50,000 SMEs had shut up shop due to cash flow and other problems. It looks as though things have not got any better, and in some sectors, they may even have become even worse with payments being kept back as a large customers preserve their own cash reserves at the expense of small suppliers. 

Maintaining cash flow is crucial for SMEs, and just a few late payments can tip many of them into the danger of insolvency.

It is easy to see that late payments mean that your clients are, in effect, funding their customers' business while their own suffers. The combination of chasing invoices and bad payment practices means small businesses can run out of cash, impacting their ability to take on new work or pay suppliers, employees and even themselves. Lack of capital is the main reason for SMEs failing and as companies grow, take on larger clients or customers and look to expand their teams, access to cash becomes more crucial. It is the single biggest factor in determining long-term success.

Many are forced to turn to other cash sources – which could be savings, loans or overdrafts - or even credit cards.

A single, large late-payer can cause problems for dozens of suppliers. 

And it’s not just businesses that suffer. Chasing payments not only eats into productive working time, it means longer hours away from families as well as extra stress for small business owners. 

Are your clients struggling with late payments? Do you want to add a high-value service that will benefit both your clients and your practice? Find out more about partnering with Rangewell

But what can you do to help?

Optimising cash flow and preventing late payments represents a real challenge for SMEs, and many will turn to you as their accountant for help. 

There are several ways that you can provide support. 

One is to help ensure that payment terms are negotiated properly at the beginning of a business relationship or new contract.  You should remind SME owners to credit check all new clients and take action accordingly. Most will not want to turn work down, so they may need to offset any high-risk clients, perhaps by considering upfront payments, deposits or part-payments, for example, 50% at the start of a project or job and 50% on completion.

This type of split payment is becoming more common in many sectors.

Another is to use the government's initiatives on the late payment problem. Last summer, the government unveiled some ways to 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.

But many of your SME clients will not have the luxury of turning down orders from large customers, even when customers are known to be poor payers. In those cases, a call to us at Rangewell may help. 

A Cashflow Loan may be one answer if the client is in crisis - but this may be a costly solution that fixes the symptom - not the underlying problem.

For many clients, and especially those who operate in the B2B space, Invoice Finance may be the best solution, providing prompt payment - and, if required, the support of a credit control team at no extra cost. 

Becoming an Invoice Finance expert with Rangewell

There are, of course, many types of invoice finance, and many providers - getting the most cost-effective solution for your client may become 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. 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.

We have a dedicated accountants partnership team for you to call – and once you have, you can have our nationwide resources working to help you grow your practice.

To find out more about working in partnership with Rangewell to find better answers to your clients' funding needs, simply call us to discover your options.  

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Richard Mitchell

Richard Mitchell

Content writer
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