Trade Credit Insurance
Chasing late payments is one of the most frustrating parts of running a small business. Without Trade Credit Insurance, unpaid invoices are more than simply an inconvenience, they can prevent businesses from growing – or even plunge them into debt.
17% of all payments in the UK are made late……while nearly 10% are eventually written off as bad debt. These rates give the UK the dubious honour of having the world’s highest proportion of late payments.
For self-employed business owners and SMEs, unpaid bills can represent a large part of the overall business book. According to the Federation of Small Businesses (FSB), more than four in five companies are paid late.
What can I do about it?
Chasing unpaid invoices wastes time which could be spent making further money. Knock-on effects can include staff pay cuts and reduced future investments in the business, while owners worry about straining relationships with clients who may not commission future work.
But these worries can be turned around to help you address the causes of unpaid invoices and take control of the situation…
- Save precious time
Alan Laing from Sage, a cloud-based accounting and financial platform, says harnessing technology to automate the process can claw back precious hours lost to making endless calls and emails.
“Automatic and digital payment methods, such as direct debit and e-invoicing, can make payments as simple as one click for your customers and virtually eliminate the top obstacles to getting paid on time,” he writes.
Clunky paper-based systems have been cited as a predominant reason for late payment at the customers end, so replacing these processes with automation could streamline the process for everyone.
- Use resources to prepare
The Prompt Payment Code (PPC) was set up by the Chartered Institute of Credit Management and backed by the Government. Businesses which sign up agree to pay suppliers on time, give clear guidance to suppliers and encourage good practice around payment. Since 2017, large organisations have been required by the government to report on their payment practices.
“Small businesses are the backbone of our economy and this Government’s Industrial Strategy is building a Britain in which they can continue to thrive”, said Andrew Griffiths MP.
“Alongside the Code, businesses can use the newly introduced Payment Practices reporting website to find out more information about the payment behaviour of larger businesses.”
- Address the relationship issue
It’s important to challenge the mindset that you don’t have the right to chase owed payments, or that doing so will strain your client relationships. This culture needs to change, starting with the mentality of SME owners.
SMEs play an important part in the economy, with businesses of all sizes benefiting from their growth. If your clients don’t pay you, you may retain their business but without politely challenging this behaviour you won’t win their respect and will keep yourself in a cycle of non-payment.
For information on how Trade Credit Insurance could help protect your business book, or for more information on SME insurance, talk to the team at Lockyers today.