Small businesses need to be pro-active about late payments
The problem of late payment is a real one, which has been addressed by a number of pledges and measures designed to make thing easier for small businesses to collect money which is owed to them, especially when invoicing large businesses. However, amongst the plans for a conciliation service to help small businesses collect what they are owed, a recent study has shown that small businesses can help themselves by ensuring that they do not allow unpaid invoices to be forgotten about by their creditors.
YouGov, the polling organisation, spoke to 500 micro businesses about how they deal with the late payments, and the study has found that as many as a third of them waited for four weeks, or even longer, to chase up unpaid invoices. 28 per cent of owner-managers said that they would begin the process of taking action within seven days of an invoice becoming overdue. The recommendations suggest a ‘late payment’ reminder letter to businesses who have failed to make payment as soon as the invoice becomes overdue.
FreeAgent, who commissioned the survey is concerned that a lack of pro-activity could be damaging small and micro-businesses’ chances of getting paid within a reasonable time-scale. They believe that a failure to act as soon as an invoice becomes overdue send a message to the late payer that it is not an urgent matter, and can be put off indefinitely.
These fears were supported by the fact that some firms who failed to make it absolutely clear that they would be chasing for payment as soon as one was deemed late found it increasingly difficult to get their accounts settled at all. 13 per cent of all the micro businesses polled, around one in eight, had ended up waiting a year or more to receive payment from a client.
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