Sort out the credit sloths
SMEs will also find it hard recouping payment from big clients - but there are ways to improve the situation
MORE RESEARCH has come to my attention from BDRC Continental on behalf of BACS, saying that SMEs continue to suffer from slow-paying bigger clients – average wait time – 39 days beyond terms.
There’s nothing particularly earth-shattering about this news, although the research does pick up a big improvement in how public bodies pay their bills, while 33% point the finger clearly at larger private limited companies for being the worst offenders.
Slow payments of trade debts is an age old problem for SMEs, but in a “dog eat dog” world, will bigger private organisations ever decide to forgo the obvious financial advantages of holding on to money that effectively isn’t theirs ? I doubt it very much.
Legislation is in place that allows businesses to claim statutory interest on overdues, but SMEs are generally too frightened to use it in case they aggravate their customers.
No-one is going to change business culture overnight, but SMEs can help improve their cash flow situations by taking direct action themselves.
Firstly, SMEs must ensure they state their payment terms on credit application forms and invoices.
They should always ask a customer whether they will need to quote a purchase order on any invoice submitted. Before any due date, but after delivery of the goods or services being invoiced for, make sure the client is happy with what they received. This phone call will eliminate the possibility of the client using the stalling tactic of blaming non-payment of an invoice on a product/service quality issue.
There are hundreds of tips one can give to SMEs. Perhaps readers of this blog can add a few more to my short list