New research shows lack of financial checks affecting businesses
Late payment is a hot topic, which tends to arise again and again in business stories and articles – proving to be a real issue affecting businesses today and a situation which does not seem to be improving, despite calls for businesses to take financial checks seriously.
New research has shown that late payment has been responsible for at least one in five corporate insolvencies in the past year, alongside the insolvency of another company – at 23 per cent and 20 per cent respectively. This highlights the importance of financial checks when dealing with customers or suppliers.
This doesn’t have to be a situation that businesses must accept as the norm, however. There are steps a business can take to minimise risk and avoid falling prey to this seemingly common issue.
Prevention is key – conducting thorough financial checks on new customers and suppliers should be carried out at the outset of the relationship, and again throughout the term of business as ongoing monitoring. A customer or supplier that is financially sound when entering into the business relationship may not be six months down the line. The importance of ongoing financial checks must not be underestimated.
Communication on invoice receipt and progress – opening a dialogue with the finance department of any new customer or supplier is important so that invoices or orders can be followed up to ascertain receipt, and again to monitor progress. Even if an invoice has a 30-day payment term, business owners should call as the payment deadline looms to ensure the invoice is being processed and that there are no delays. Waiting until the payment is late isn’t advisable.
Fast action on late payment – if an invoice is late with no previous notice of problems, get on the phone straight away to find out what the delay is. Asking for an explanation as to why a payment is late isn’t unreasonable, and if there is a genuine reason and the situation cannot be avoided, knowledge of late payment enables business owners to prepare to cover the period of delay.
Gen up on the invoice process – different organisations have varying invoice and payment processes so it is worth establishing what that process is with each and every customer. Late payment as a result of an invoice not being submitted according to the proper processes is completely avoidable, but can be an ongoing problem if not addressed. Finding out about required purchase order numbers, the correct contact for processing and company payment run dates is a wise move.
The bottom line is, even a company with the best product, service and staff can be undermined by late payment problems. Following the above advice will go some way to alleviating any potential problems.
For more information about our credit check service, Business Protect, contact us today.