Policy and Advocacy Chairman, Federation of Small Businesses
It’s an unfortunate fact of corporate life in the UK that many big businesses fail to pay suppliers on time. More than £23 billion was owed to firms in late payment in 2019 – up 80% on the preceding year. So how can you protect yourself from the debilitating scourge of late payment?
1) Credit check clients
The Government requires the biggest businesses to report on their payment practices, so have a look at how potential customers perform on the invoice processing front. You can also employ Experian to conduct credit checks for a small fee.
2) Be professional
Lead by example. Be crystal clear about what you expect in terms of payment times and terms at the outset of your relationship with a new client. Make sure your invoices are issued swiftly, look professional, are easy to read and clearly set out how and when payment should be made.
3) Employ tech
Take the headache out of chasing payments by setting up automated reminders that invoices are due. Online accounting platforms can usually facilitate this, and the rise of open banking means more tools will become available over the coming years.
4) Consider alternative finance
If you’re happy to free up the cash you’re owed immediately for a fee, why not consider invoice finance? It usually takes two forms: selling your invoices to lenders who then chase the cash themselves, or using invoices as collateral for short-term lending. FSB Funding can put you in touch with a range of providers.
5) Ask for help
Don’t suffer in silence. FSB Debt Recovery can provide targeted support where late payments are concerned and we’d encourage you to share examples of bad practice with the Small Business Commissioner. Through working together, we can bring our late payment crisis to an end.