How can small business owners take control of their cash flow when the average time taken to pay their invoices is reported to be 38 days?
‘The cheque’s in the post’ used to be the standard delaying tactic for not paying an invoice, but according to BACS, the most frequently heard excuses now are that the payment is ‘awaiting authorisation’ or that it’s being ‘processed by accounts.’
It is believed that large companies are the worst offenders for delaying payment, with the retail and distribution sector suffering the most at the hands of late payers.
So what options are open to beleaguered and stressed small business owners to overcome the problem of slow payers?
- Automated payments
Automated payments save time and money in administration and invoicing costs, and can allow for overdue amounts to be broken down over a period of time so that full payment is at least more likely, if not definite
- The Prompt Payment Code
Make your late payers aware of the Prompt Payment Code, an initiative championed by major business organisations including the Confederation of British Industry, and sponsored by some of the major UK banks.
Stressing the importance of prompt supplier payment within agreed timescales, the Code promotes best practice, not just in terms of payment, but also in procedures for dealing with any problems or issues surrounding specific invoices.
In January, the Enterprise Minister Michael Fallon, published a list of all FTSE 100 and FTSE 250 companies who had failed to sign up to the Prompt Payment Code in an attempt to ‘name and shame’ them into taking action.
The Prompt Payment Code website states,
“Independent analysis by Experian suggests that current signatories to the Code represent over 60% of total UK supply chain value, so the Code is making a difference.”
So it looks like small business owners are finally getting the support they need to keep their cash flow more reliable, and their heads above water. Let’s hope it does make a difference before it’s too late.