Late Payments, a â€˜National Scandal'
July 13, 2011
â€œAt one time, in those pre recession days, finding customers was one of the biggest challenges facing SMEs, now its getting those customers to pay on time for goods and services â€“ and its becoming a national scandal,â€ says Luisa Grey, a director with leading Direct Debit bureau Eazipay.
At any one time, SMEs are owed Â£27 billion in late payments and the main culprits are large corporates â€“ the very organisations that SMEs are keen to do business with.
According to Bacs, which runs the electronic processing system for financial transactions, a third of SMEs are blaming large organisations for the fact that SMEs are owed an average of Â£27,000 and are being forced to wait 39 days longer for payment than was agreed under their contracts.
â€œThe knock-on effect can be catastrophic for small companies. They canâ€™t invest, make plans, recruit or even pay their own suppliers. Ultimately some of those companies with perfectly viable businesses will go to the wall because they are not being paid on time,â€ says Luisa.
And the Federation of Small Businesses agrees saying: â€œThe scourge of late payments is both commercially and ethically wrong. Some 73 per cent of companies report that they have been paid late in the last year. Small businesses suffer cash flow problems, not when they make less profit, but when work is not paid for in the agreed time.â€
So what can SMEs do to protect themselves from the millstone of late payments?
Eazipay has some suggestions:
- make sure you have a contract
- make sure your payment terms are perfectly clear in your contract
- check invoices carefully, any mistakes can lead to further payment delays
- make a friend in your customers accounts department, that way you are a person not an invoice number
- print your invoices on red paper, that way you stand out
- request (firmly) that your customers pay by Direct Debit, that way you are more likely to be paid on time
- â€œyouâ€™ll be hearing from my solicitorâ€ may sound good as you say it, but it might well inflame a difficult situation, stay reasonable but firm
- would you consider a discount for prompt payment?
- make invoicing a priority, too many SMEs invoice at the last minute
- If you are getting nowhere with the accounts department, involve someone else. Do you know the marketing or sales director? Approach them.
â€œItâ€™s your money and you have a right to be paid for the goods and services you provide,â€ says Luisa adding: â€œRunning a small business is hard enough without the unacceptable burden of late payments.â€
- Ends -
NOTES TO EDITORS
About Eazipay Ltd
- Established in 2002 by local entrepreneurs Kathy and Ron Bradney, and their colleague, Luisa Grey, Eazipay Ltd has become one of the UKâ€™s fastest growing Direct Debit processing companies.
- Eazipay now provides regular Direct Debit services to over 650 companies in a wide range of market sectors throughout the UK, Europe and beyond.
- In March 2011, Eazipay recorded its best ever month for Direct Debit collections when Â£9.8 million worth of Direct Debits were processed on behalf of its clients.
- Eazipay was recently awarded â€˜Affiliateâ€™ status from Bacs, the governing body for Direct Debit processing in the UK payments industry. The company is now a member of an exclusive group of 38 other Bacs Affiliates, which includes representatives from some of the UKâ€™s leading businesses, banks and building societies, as well as government organisations and banking technology providers.
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