In a bid to avoid late payments, UK businesses are tightening cash and control procedures, new research finds.
A study compiled by Clydesdale & Yorkshire Banks shows that, over the last ten months, the average time businesses took to collect payments reduced from 52 to 49 days.
This figure represents combined sales of £6.7 billion and shows, the bank suggests, that despite the fact that invoices appear to be paid on time, business owners are still apprehensive about the impact that late payments and bad debts could have on business.
The survey represents the questioning of 1,000 UK companies and also reveals that 10 per cent of businesses say closing or seriously scaling back operations would have to be looked at if customers took more than 90 days to pay invoices.
Martin Rothera, head of the Invoice Finance division at Clydesdale & Yorkshire Banks, says that the narrowing of procedures is due to the growing pressure on cash and the availability of credit.
He adds, ‘All businesses, particularly small and medium-sized enterprises, depend on healthy cash flow to pay staff, buy stock and keep on top of their own invoices and bills.
‘Poor cash flow management can be one of the most critical issues that businesses face but we believe UK companies have listened to the advice to tighten up their systems and controls.’
For businesses to avoid the problems of late payment, Rothera suggests implementing procedures such as agreeing payment terms and conditions upfront or using incentives for early payment.
But he warns, ‘If late payments are a concern or are restricting cash flow, it is important to be rigorous in the debt collection process; recording conversations, possibly enlisting the services of debt collection agencies, but ultimately looking for a swift resolution.’