SME credit management falls short

Few companies use formal procedures to tackle the problem of late payment, a survey finds.


Few companies use formal procedures to tackle the problem of late payment, a survey finds.

Few companies use formal procedures to tackle the problem of late payment, a survey finds.

According to a study of 500 businesses by credit referencing agency Graydon UK, 51 per cent of companies cite that the late payment of trade invoices is a problem, with 16 per cent saying they have almost been put out of business as a result.

However, less than half (44 per cent) employ formal credit control procedures, with 38 per cent instead relying on a mix of formal and informal processes and 16 per cent juggling payments on an ad-hoc basis.

Only a third (33 per cent) of respondents offer prompt payment incentives, while just 30 per cent using existing legislation to charge interest on late payers and 40 per cent opting for cash flow management software.

Gordon Skaljak, external spokesperson for Graydon UK, says, ‘The current economic climate makes it more important than ever that companies clearly understand the risks and opportunities associated with their operations. This includes identifying the cash flow and other risks triggered by the late payment of trade invoices by customers.

‘Companies cannot achieve sustainable growth if they aren’t paid on time consistently. This is why having a formal credit management process based on reliable, accurate customer payment behaviour information is essential for businesses who want to transact with confidence and fulfill their sustainable growth potential.’

Phil Orford, chief executive of the Forum of Private Business adds, ‘We need to do two important things – first, communicate to business owners exactly what they can do proactively to minimise late payment, then we need to provide the support and services they need to make tackling late payment a standardised business process.

‘Second, we need to persuade large corporations to embrace paying their suppliers on time and in full, avoiding the temptation to impose damaging, retrospective changes to terms and conditions, so that prompt, proper payment washes down the supply chain.’

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