Small business late payment advice timely, says Knutsford’s Forum of Private Business (FPB)
Speaking at the latest event, Richard Antipas, Litigation Manager at 2020mobile, passed on some well-received advice on dealing with the late payment of invoices. Once a serious inconvenience for business owners, the problem has intensified because of the credit crunch and is now a major threat to maintaining cash flow and staying afloat.
“Delaying the payment of invoices has become part of the UK business culture and companies are holding on to their cash as long as possible to earn interest, avoid borrowing or simply stay liquid,” Mr Antipas told the assembled guests. “The knock-on effect of this practice has, up until the onset of this recession, been mitigated by the widespread availability of credit from banks. This access has all but dried up, particularly in the SME world.”
The Forum of Private Business (FPB), a Knutsford-based business lobby group representing 25,000 small firms across the UK, is campaigning for the UK’s largest businesses – often the biggest culprits in not paying their smaller suppliers on time – to sign up to the Government’s ‘prompt payment code’.
The idea behind the code is to directly address the culture of poor payment in the UK by targeting big companies first in order to set in motion a consensus right down the supply chain.
“It is pleasing that more companies have agreed to sign up to the Prompt Payment Code. It is also welcome that others have committed to do so in principle,” said the FPB’s Chief Executive, Phil Orford, following a recent meeting chaired by the Business Secretary Peter Mandelson, in which a number of FTSE 100 companies tacitly pledged to pay fair.
He added: “We would urge them, along with the remaining FTSE 100 companies and other businesses, to sign up without delay in order to create the certainty that smaller businesses need, particularly at the present time.”
Late payment is one of main barriers thwarting business growth and, therefore, economic recovery in the UK. In all, 26% of respondents to the FPB’s recent Economic Downturn Panel survey reported improvements in markets for products and services, compared to the 23% reporting a deterioration – the first time since November that more business owners experienced positive rather than negative market conditions.
However, according to the survey, instances of late payment worsened for more than half of respondents (56%), with almost a quarter (24%) reporting subsequent cash flow difficulties as the ‘key issue’ affecting their businesses.
Research carried out by the FPB at the end of 2008 suggested that, at any one time, almost one in three (32%) small businesses are owed between £1,001 and £5,000. In addition, 88% said they were not being paid within contractually-agreed periods and 72% that the problem had a ‘serious’ or ‘very serious’ impact on their businesses.
In reverse order, Mr Antipas’ top ten tips to keeping on top of payments are:
• Ask for the money – raise an invoice and chase it up
• Keep proper records of every step, including telephone conversations
• Make invoices simple, so they are dealt with promptly and with no mistakes
• Agree payment terms before the work is done or the goods delivered
• Facilitate payment – make it easy for the customer by working to its methods
• Become a purchase Ledger department – do their work for them and establish a rapport with the accounts department
• Remove objections before they arise, ask for feedback immediately, ask if you can do anything more effectively
• Deal with queries – don’t put them off or your customer will put of paying you.
• Pre-empt the payment deadline, prompt your customer to pay in advance once you know how it works
• Know your customer – don’t rely on back end debt control and recovery, be proactive. Check your customer is credit worthy.
The latest meeting of Network Knutsford took place on Thursday, May 21. The next is on Thursday June 18. For more information go to www.network-knutsford.com. To find out about the FPB’s campaigns and money-saving products and services, visit www.fpb.org.