Most small companies say that their businesses have already been affected in some way by the economic downturn. Interestingly, Northern-based companies seem to be faring better than those elsewhere in the UK.
When questioned in June as part of Bacs’ regular omnibus into the habits of British companies, almost half (45%) of SMEs in the North of Great Britain said they had experienced no visible indicators of the economic slow down that has been so widely reported.
Of the British companies that do say they’re seeing the effects of a pinch, 37% of SME owners claimed projects were taking longer to come to fruition and reported that they had cut spending on things like business travel.
Late payment problems
30% of those polled confirmed the late payments problem is being exacerbated, with payments overdue coming in even later, indicating that cash flow has become more difficult to manage as the financial climate has tightened in recent months. As a result, over a quarter (28%) said they are now spending more time than ever chasing late payments.
And the main late payment culprits? At a national level, apparently other small businesses and one man bands are the worst offenders with 44 per cent of respondents blaming individuals and 41 per cent pointing the finger at SMEs. In comparison, just 34% per cent lay blame at the door of large corporates.
Tips to encourage prompt payment from clients
To help small companies through the downturn, Bacs has come up with the following payment tips.
1) Encourage all trading partners to pay invoices by Bacs Direct Credit. Include your sort code and account number on invoices along with the message “Pay Me Direct.” This small step can save time on payment reconciliation and queuing at the bank to pay in a cheque which in turn can have a positive effect on cash flow.
2) Late payment legislation has been in place for over ten years so why not use it? You are legally entitled to add statutory interest to overdue invoices and can also claim reasonable debt recovery costs if it gets to that stage.
3) Save your own suppliers time and money by paying them using Bacs Direct Credit. Once you have a reputation for paying late, your suppliers may not be so keen to work with you next time around.
4) Arrange to pay your regular business bills by Direct Debit. This way you’ll know that the payment is being made each month, reducing the risk of incurring your own late payment charges.
5) If you have prompt payers, why not reward them so they continue exercising good practice? Consider offering early payers discounts encouraging them to keep the money flowing in.
You can find out more at www.paymedirect.co.uk.