The continuing culture of late payment has been of significant concern to our members, and last week’s news from Experian suggested that businesses are paying their bills later than ever, despite attempts by the Government to break the cycle. The company’s latest second-quarter figures showed that businesses paid bills on average a day later than the same period last year, at 24.58 days beyond terms from April to June 2013, compared with 23.46 days in 2012.
This week’s announcement by the Business Secretary, Vince Cable that the Government is considering several options, including a late payment levy, as part of a tougher stance to tackle the £30.2 billion owed to business in outstanding debts is welcome news, but the devil will be in the detail. We will be interested in seeing how any new measures will address the flaws of previous attempts to break this ongoing culture of late payment.
Current regulations have placed the onus on the supplier to act when a payment is late, through charging interest but this has done little to break the cycle. Many small companies continue to be reluctant to take action against late payers, particularly large companies, for fear of losing contracts, which given the delicate state of the economy at the moment could be the difference between remaining afloat and going under.
Fines are one option to prevent late payment, but it needs to be coupled with a clear message that fair treatment of suppliers should be the norm for any responsible business. Any penalties should target firms at the top of the supply chain and should be proportionate to the size of business to act as a suitable deterrent. The Forum was part of the Be Fair, Pay on Time cross party campaign led by Debbie Abrahams MP that submitted recommendations to tackle late payment and we are interested to see if the Government will take some of these forward.
Late payment along with rising costs and cash flow are the key worries for our members. But businesses have realised the important steps to take to manage their finances in the current climate.
Strong credit control procedures are vital, setting clear credit limits for all customers, billing promptly and enforcing debt recovery procedures. We offer practical advice and information on this in a free to download guide at www.fpb.org/creditcontrol
It is also vital that businesses keep a track on where they stand financially, their and their customer’s credit ratings as well as the cash flow situation.
The earlier you can spot the warning signs of trouble on the horizon and the need to seek advice and take action, by looking to reduce overhead costs, negotiating with creditors and seeking out new ways to expand their existing customer base.
A tougher stance on late payment will allow our members to focus on what they do best. Doing business, seeking new opportunities for growth and getting Britain trading at a 2008 level.
Despite talk of a slight upturn in the economy, this still remains a challenging time for many of our members as they look to keep control of their finances.