08 Aug 2017

If your business is owed money, you need to read this...

If your business is owed money, you need to read this...

Scotland is the worst place in Britain for small to medium-sized firms to experience problems with late payments.

This has been revealed by Bacs Payment Schemes, the company behind direct debit and Bacs direct credit in the UK.

But, on a happier note, Bacs also said there has been a dramatic drop in overall late payment debt - with new figures showing that UK SMEs are owed £14.2billion in contrast with five years ago when the total was £30.2billion.

Out of the 1.7million SMEs in the UK, almost 640,000 say they have to wait beyond agreed terms for payments.

Knock-on impact

Scotland has the highest percentage of firms reporting late-payment issues (46%), followed by Northern Ireland (39%), England (37%) and then Wales (34%).

Nearly 40% of companies are spending up to four hours a week chasing late payers, while 12% of SMEs employ someone specifically to pursue outstanding invoices.

Almost one in five of SMEs affected by overdue settlement admit that being owed between £20,000 and £50,000 would be enough to drive them into bankruptcy, with 7% of businesses saying they are already in that danger zone.

Of those facing late payments, 16% struggle to pay their staff on time, while 28% of company directors reduce their own salaries in order to keep essential working capital inside their businesses.

And nearly a third say that overdue invoice settlement forces them to pay their own suppliers late.

A quarter rely on bank overdrafts to make essential payments, and  15% find it difficult to pay business bills like energy, rates, and rent when they’re due.

A significant issue for SMEs is the amount of time they are being kept waiting beyond their previously-agreed payment terms.

Almost a third of companies face delays of at least a month beyond their terms and nearly 20% are having to wait more than 60 days before being paid. 

Debt recovery tips

So what can you do make sure your business gets paid on time?

Aberdein Considine Partner Rob Aberdein is one of Scotland’s leading debt recovery lawyers and acts for many of Scotland’s lifeblood SMEs.

He says businesses should follow these five key steps to make sure they avoid losing out.

  • Invoicing - Issue invoices with clear payment terms and as many ways to make payment as possible. If possible, also make an online payment portal or internet banking available.
  • Credit control - Make sure you have robust credit control processes in place internally. These will flag non-payments early.
  • Be proactive - Don’t be afraid to pursue unpaid debt proactively yourself – if you’ve done a good job or supplied the goods, you deserve to be paid.
  • Move quickly - If you think the debtor is in financial difficulty – go early and shout loud, often the loudest voice will get paid whilst others may not.
  • Be prepared to go to court - Don't make idle threats to go to court. Commit to a back stop date or set of circumstances and be prepared to follow through.

If you would like to speak to Rob or a member of his team about debt recovery, call 0333 0044 333 or click here.


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