Late payments are the bane of every business. If your customers don’t pay on time, you can find yourself unable to pay your own bills – requiring additional borrowing, or in the worst possible scenario leading to insolvency. But press customers too hard, lose their business and you could end up in the same scenario. It’s an old dilemma with no easy answer.
From a strictly legal standpoint, many businesses in the UK can claim compensation for late payments. However, a recent survey of SMEs by commercial litigation specialists Lovett discovered that 58% of respondents would not pursue this compensation for fear of alienating clients.
This statistic contrasts alarmingly with that for late payments: nearly 25% of businesses are paid late – on average between one and two months behind schedule.
A few statistics about timely payment
In fact, the survey found that only 22% of businesses were paid in line with agreed terms, whilst in terms of late payments 49% were paid the following month and 23% had to wait at least a month longer. Only 5% of respondents said that they avoided pursuing late payments due to cost; 20% said they did not consider aggressive debt recovery worth the trouble whilst 18% thought it would be too time-consuming. Regarding payment compensation, 48% stated that they would never pursue this in any circumstance and only 20% said that they do so regularly.
Businesses should claim what is rightfully theirs
Lovetts’ Chairman Charles Wilson said, “The perception that action will lead to loss of custom is actually quite far removed from the reality in our experience, and as such it is a real concern that so many businesses live in fear of upsetting their customers by claiming what is rightfully theirs. A lot of this comes down to the terms and conditions that form the basis for the relationship – if it’s made clear from the outset that late payment compensation will be claimed for late payments, then there are no surprises and in fact it can often incentivise customers to pay within terms to avoid the additional cost. We would really urge credit professionals to reconsider this highly cautious attitude to help get a grip on the late payment culture that is so pervasive in the UK.”
How Cashsolv can help
If your customers are paying late and leaving you in the red, a business loan from Cashsolv can smooth out your cashflow – and we can have the money inside your account within 24 hours. Where customers are proving particularly recalcitrant, our commercial debt recovery company Debtcol offers tailored services to obtain the money you need without destroying the commercial relationships you rely on. Simply click on the links to see how we can make the difference.