Late Payers Affects UK SME’s Cash Flow

The UK economic climate has “battered” small businesses since the second quarter of 2008 when the recession had officially started (as reported by the financial advice bureau). Cash flow issues for small businesses have seen a dramatic impact due to increased late payment throughout the business community. Increased late payment is a direct impact by a recession due to the limited availability of credit throughout said period.

Recent research by Bacs Payment Schemes Limited shows that on average UK companies have to wait a further 41 days on top of their agreed payment terms to receive payment. SME’s rely on cash flow for the day to day running of their business, and the continued increase of late payment is reported to be affecting 961,000 businesses.

Large companies have been sighted as the worst culprits of late payment with 37% of respondents complaining about late payment. This falls to 17% of respondents complaining about sole traders habits and a further 6% complaining about governmental and non for profit organisations. This has prompted the government to change its payment habits in the 2010 budget; all payments will be made in 5 days rather than the usual 30 days, in an attempt to help increase cash flow. However negative views show that only a small percentage of UK SME’s supply this sector.

Increased late payment has lead to enormous amounts of outstanding invoices since the beginning of the recession. It is reported that the average total of outstanding debt has risen by £6.2 billion. Sectors that have been affected the most are manufacturing, distribution and leisure.

Taking all of the above into account, small businesses need to change their collection strategies. Late payment and cash flow issues can be enough to fold a business. How can Largo help? Debt collection has proven to be successful in returning clients to payment terms and increasing cash flow. Not only is it an economical method of collection, Largo even makes sure that we manage your client’s relationship so future business is not affected. Largo’s Managing Director Tom Flannery said “We have seen our corporate client base grow year on year and success rates have proven that outsourcing debt collection need not be a costly exercise”.

For more information or help with collections please contact;

Gareth Fawke on 07500 858586 or Tom Flannery on 07816 905404.

(Article by Gareth Fawke; references from The Financial Advice Bureau & Bacs Payment Schemes Limited)