Overdue accounts cost both time and
money, and can have damaging knock-on effects, says Evette
Orams
Business owners are only too aware of the
endemic challenge of late payment and the role it continues to play
in hampering the economy’s return to growth. The situation is
likely to worsen as the UK has slipped into the first double-dip
recession since the 1970s.
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The problems with late payment are exacerbated
by the fact that it can trigger a ‘domino effect’ along the entire
supply chain. According to Hilton-Baird Collection Services’ most
recent Late Payment Survey, which questioned 250 business
owners and finance directors in January 2012, the second most
common impact late payment had was forcing respondents to pay
suppliers later (59%).
As expected, the most common upshot was that
credit control teams had to spend more time chasing customers
(76%), which detracts from the collection of other invoices.
Indeed, the most common excuse for late payment cited by customers
was that they were waiting for payment from their own
customers.
Given the gravity of the challenges, it’s
encouraging that businesses are beginning to do something about it.
Our sister company’s survey additionally found respondents were
largely adopting a back-to-basics approach.
For instance, in the second half of 2011, there
were significant rises in the proportion of firms sending regular
reminders to their customers (69%), while just under half (47%)
suspended work and services. A further 15% took measures to secure
credit protection to safeguard themselves, demonstrating that
businesses are co-ordinating their approach to regain control of
their sales ledgers. However, with the average invoice still being
settled 17 days beyond agreed credit terms according to our
research, it’s clear more needs to be done.
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By GlobalDataThe concerted effort to reduce the opportunity
for customers to delay payment will be crucial in the coming
months. Utilising resources is central to this, be it the help of a
debt collection agency or the use of a funding facility to overcome
these challenges.
We are encouraged to see the asset-based
finance industry continues to tackle this challenge head on, with
some products incorporating funding against the value of invoices
with debtor protection to safeguard clients against protracted
default and bad debts.
We are sure businesses can steer away from the
challenges and move towards stability and growth. We hope this will
become increasingly standard procedure, particularly while the
economy remains tough.
Evette Orams is managing director
at Hilton-Baird Financial Solutions
