2021 was a difficult year for businesses with regards to late payment, and the outlook for this year is also looking rather challenging.
Many businesses have seen late payment worsen during the past two years of the Coronavirus pandemic, with over a third of company directors reporting they had experienced an increase in late payments during this time, causing them to suffer a level of financial stress and uncertainty. And with Government support schemes mostly coming to an end, the situation could well continue to prove difficult for business owners.
Financial help available for companies during the pandemic is being phased out – namely the Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS), which provided a lifeline for many businesses to allow them stay operating. Thousands across the UK will now no doubt be concerned about how they will keep their business afloat without these emergency measures and schemes in place and may struggle to keep up with repayments.
A report in 2021 estimated that 18,900 companies were spared insolvency because of these initiatives, and until recently, companies in financial distress because of the pandemic were protected from creditor action. With this situation now changing, as we move into 2022 we could well see a rise in corporate insolvencies, which is a depressing thought considering the hardship felt by so many due to the pandemic.
Here we look at 3 simple tips to help protect your business from late and non-payment:
Keep a tight eye on your credit control –
Business cash flow is the oxygen for all companies, big and small. Business cash problems need to be managed right away, or your carefully thought-out plans to sustain or to grow, go down the drain. Late payment is never a win-win situation as it seriously impacts your cash flow. An efficient and effective credit control strategy is key to protecting your business from late and non-payment.
A contract between businesses should be a must, as it will contain clauses and terms about late payment and other mandatory aspects. A contract is enforceable as both parties agree to the terms when signing to avoid future complications and invoice disputes. It is key that you know who you are offering credit to and researching a potential client or supplier via credit reports. Keeping a close eye on your business credit practices will allow you to keep track of any potential problems as they arise and tackle them immediately.
Consider credit scoring
Carrying out credit checks on clients regularly helps businesses to protect themselves against non-payment. A good credit service should enable you to see if any detrimental data exists, check propensity to pay and understand suitable credit amounts. Included in an identeco subscription is the ability to view credit worthiness of any UK company or business. Not only will this give you the insights you need to make an informed decision, but subscribers will be notified when this credit rating changes – or when any new information is available on that company. These features enable you to protect yourself from bad debt and the impact of a customer becoming insolvent before settling your invoice. Read more about our annual subscription here.
Keep on top of unpaid invoices as soon as they happen
The faster you act when you are facing late or non-payment, the more favourable the outcome when getting the money that you are owed. The longer an invoice remains outstanding the less likely it is to be paid. Therefore, it’s vital that you keep on top of your invoices and address any issue as it happens. If you haven’t received payment by the day after the due date, be sure to chase your customer. Some businesses think that doing this will damage their relationship with their customer, but there could be a legitimate reason for non-payment. If you continue to have issues with non-payment and are struggling to collect the payment internally you could benefit from partnering with a debt collection agency such as Controlaccount; where we have years of expertise in handling the entire debt management and collection process, which an outstanding success rate.