SMEs reluctant to chase payments are losing out on thousands, survey shows
The results of a survey conducted by credit control service Satago, unveiled this week, have shown that one in three (32 per cent) of small and medium-sized business owners are reluctant to chase late payments owed by their customers.
The majority of them, 81 per cent, feel uncomfortable with the process and 19 per cent don’t want to jeopardise the relationship – to the extent that a third admit to writing off debt entirely rather than chasing it through.
There has been a real drive from the government to help small businesses affected by late payments, with the introduction of the Prompt Payment Code, which some have said doesn’t go far enough. Late payment can have a huge effect on SMEs, particularly on growth and jobs.
The law states that businesses owed money are entitled to charge interest of eight per cent on top of the Bank of England base rate – but few do, as they believe this will jeopardise the relationship further.
We think these results are worrying; no business owner should be worried about upsetting a customer in order to be paid for work agreed and carried out. This reinforces the need to have contract and payment terms laid out and agreed by all parties for clarity, a clear and agreed invoicing process, as quite often, the process of a larger company will be very different to a smaller company, and a structure for chasing payment efficiently and in a timely manner to avoid matters slipping or payment being further delayed. It can be of real detriment to a business to have cash flow undermined by late payments.
Any clients needing advice about broaching this matter, guidance on payment terms and processes for chasing payments can call us. We’re here to help.