Late payments and SMEs
SMEs accounted for 5.7 million UK businesses in 2018 in the UK, and ensuring they can prosper is important.
Late payments are costing SMEs with almost a third of smaller businesses experiencing late payments. Late payments have cost SME businesses on average at least £10,000 in the last 12 months. The average small business is owed over £32,000 in late payments.
For smaller businesses this can impact significantly on their ability to grow. It also places burdens on their suppliers and can affect their ability to pay employees with 12% of SMEs reporting that this has been an unfortunate consequence of a customer not paying on time.
What SMEs can do to prevent late payments
- Look up any new clients on registry trust to see if they have any outstanding County Court Judgments
- Obtain credit reports on new customers before you start working with them
- Set a realistic credit limit depending on the client’s circumstances
- Director guarantor agreements can be useful if the business you are taking on as a client is new and doesn’t have a payment history or credit rating
- Ensure you invoice promptly and send timely reminders for payment; these processes can often be automated to save you time.
- If they are a large company and fulfil any the following criteria; either £36 million in turnover, £18 million on its balance sheet or 250 employees then they must report on their payment practices and you can look them up here.
What you can do if a payment is late
All businesses no matter what size they are should have clear internal processes they follow if a customer doesn’t pay within the agreed terms of the contract. If a payment isn’t received the first step is usually to send a letter to the client with a statement of the total overdue amounts.
If, after following this up with phone calls and not receiving payment you can apply for a county court judgment by submitting the evidence to the county court. This process can then be followed with a transfer up of the judgment if the total amount owed is over £600.