Adopting a ‘back to basics’ approach is helping SMEs ease pressures of late payment. Image courtesy of sxc.hu
Late payment remains an issue for small businesses as they struggle to stay afloat in the UK’s unpredictable economy. However, research from Hilton-Baird Collection Services
has found that while UK SMEs are feeling the pinch, they are adopting a 'back to basics' approach to credit control in a bid to ease the pressures of late payment.
247 business owners were surveyed during January 2012 and the research concluded that SMEs are taking a more proactive stance in order to stay on top of their credit management and reduce the likelihood of late payment. There has been a significant rise in the use of constant reminding (69%), suspending work and services (47 percent) and writing to debtors (45%). Other popular credit management strategies include credit insurance (15 percent), while almost half (47 percent) are credit checking new customers.
Seemingly, as a consequence of this ‘back to basics’ approach, payment performances of UK business improved during the second half of 2011.
Businesses are now waiting an average of 17 days beyond their agreed credit terms to be paid by their customers, a full five days sooner than the six months prior to July 2011. There was also a fall in the age of respondents’ debtor books, with 66 percent now classifying less than 10 percent as more than 90 days old, up from 57 percent in July.
Although alternative options are available, there is evidence that the situation has been antagonised by the winding down of HM Revenue & Customs’ 'Time to Pay scheme'
. Worryingly, only 69 percent of the one in five applying to defer the repayment of their tax arrears in the second half of 2011 had their applications accepted. This clearly indicates the importance for businesses to be wary as to who they supply goods and services to in the months ahead, particularly given the uncertain economic prospects.
Despite the evidence that some businesses are tackling payment issues head on, there still remain a number of worrying trends. The latest research shows only 18% of all firms reported no delay in payment in the last six months, though only one in four said they would consider charging interest on late payment in the next six months.
, Managing Director of Hilton-Baird Collection Services, commented: “We are pleased that payment performance is improving. However, late payment is still hotly debated and it is no secret how much it has affected the financial health of UK businesses. It is therefore encouraging to see that the majority are employing a range of different credit management strategies in order to clamp down on late paying customers, something I hope will continue."