Forbes Collect, a solicitor led commercial debt recovery service based in Preston, Lancashire, are encouraging local business to get tough with late payments and invoices.
In 2016, insurance company Zurich found that more than 53% of Britain’s small and medium sized businesses (SME) have issues with late payments with 41% of those experiencing serious cash flow problems as a result. According to Zurich’s SME risk index, £225bn is owned in late payments to British SMEs and two-thirds of UK SMEs agree that late payments do lead to SMEs being forced to close.
These alarming statistics have prompted Forbes Collect to encourage local businesses to get tough on their debtors.
“As soon as payment for an invoice is late, you should not delay in implementing your credit control process,” said Tom Smith, Forbes Collect partner and head of dispute resolution. “Unpaid invoices are a lot harder to recover the longer they are left. The length of time that an invoice is unpaid is often a large factor in a debt turning into a bad debt.”
The Zurich study also found that 58% of SMEs will not attempt to claim late payment compensation for fear of losing future business.
“When it comes to recovering late payments, issuing a letter from a solicitor can encourage your client or customer to pay up,” said Smith. “For those worried about their business relationships, using a solicitor led service can depersonalise the whole collection process and make it easier for you to collect late payment interest and compensation”
To help local businesses take steps against late payments, Forbes has created a question and answer interview with Smith that outlines what businesses can do and how they can protect themselves against bad debt.
Smith discusses the first thing you should do if you have a late paying client or customer?
“As soon as payment for an invoice is late, begin your credit control process. Do not delay! I would advise that the first step in your credit control process is a seven-day demand for payment. The day after this has been posted it might be worth making a phone call to the debtor. Making contact quickly will either mean that you receive payment or issues surrounding the invoice are flushed out as soon as possible.”
But what if they don’t respond or still won’t pay?
Smith advises; “If payment of the unpaid invoice is still not forthcoming, I would suggest taking legal action as soon as possible. Have a set deadline in your credit control process and if payment is not received by this date pass it over for legal action. I know it may seem obvious, but it is very important, as problems such as insolvency or a disappearing debtor would be minimised.”
How do I prevent my clients and customers from paying late?
If you are a smaller team and find yourself slipping behind with payments. Tom’s tips to avoid late payment are:
1. Have a clear credit control procedure
2. Know your customer and obtain as much information about them as possible
3. Have clear terms and conditions
4. Credit check customers where possible
