Business Recovery Specialists

Cash Flow Problems and Late Payments

Late Payments – a Key Cause of Cash Flow Problems. 

There are many reasons why businesses experience cash flow problems. One of the most common reasons is late payment, especially in the SME sector. As Business Recovery Specialists we often come across companies who are having significant cash flow difficulties because their clients/customers are not paying on time. This can then lead to otherwise sound and successful businesses beginning to struggle to pay their creditors on time. It was encouraging, therefore, that the Government published a consultation document on the issue. This article asks if the proposed changes will go far enough.

The Federation of Small Businesses Has a View

It is quite clear that late payments are a significant problem and that it isn’t going away. The fact that the Government has issued a consultation document that focuses on how the new small business commissioner will handle complaints about late payment of invoices from the SME sector is something. However, we agree with the FSB, who have suggested that the document does not address the key issue, which is how to stop it happening, or at least reduce its incidence, rather than having a better system for dealing with complaints when the problem has already started.

The FSB rightly points out that the late payment culture in the UK is most common amongst larger companies who make smaller companies wait for payment. £26.8 billion is the figure that is not paid on time to small businesses, with the average amount they are waiting for being £31,901. These are significant figures, and drilling down, they translate into the fact that about 30% of small businesses receive late payments from their clients, with an average delay of a month from the terms and conditions.

Late Payments cause cash flow problems. What can be done?

It is certainly true that late payments cause cash flow problems, and on an economy wide level they are a brake on the efficient working of the economy. The FSB are correct when they say that Government must go above and beyond the contents of the current consultation document by prioritising the development of a solution to the UK’s late payment culture.

Until such time as new, effective and easy to implement legislation is passed, we do not see the late payment culture improving. So if your business is experiencing cash flow problems because of late payment, now is the time to take action

Contact us for Help and Advice With Late Payments

The team here at Business Recovery Specialists has helped many companies who are suffering because their clients are paying late. There are many ways we can help. Here are some of them:

  • Firstly, why are payments being delayed? Is your client or customer solvent? This can be a sensitive and difficult question to ask. We take all the stress off your shoulders.
  • Debt Insurance. We can recommend and implement the best type for your business.
  • Setting up an effective Invoice Factoring plan for you. There are many on offer. We can help you find the right one for your business.
  • If debt collection is needed we can implement it for you. We know the legal steps that need to be taken.
  • Making certain that there are no reasons for payments to be withheld due to internal systems’ problems. We will check your procedures to ensure they are all as good as they should be.

If your business is suffering cash flow problems due to late payment, or for any other reason, the earlier you contact us or call us on 0333 222 8065, the more we can help.