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Cash flow remains key for many SME businesses

By CreditMan Friday, January 17, 2020

While the economy appears to be on the up and the recent election result will no doubt breed confidence, cash flow still remains vital to most businesses. According to figures released by Pay.UK, the SME late payment debt has risen to an astounding £23.4 billion in the UK, up from £13 billion owed in 2018.

Bacs reports that ‘the number of businesses experiencing overdue payments has hit 54 per cent among small to medium size companies; that’s the highest level since 2015, when the figure stood at 55 per cent’. Companies are also seeing an increase in late payment debt burdens, with the figure increasing to £25,000 on average per company. According to Pay.UK, of those SMEs impacted by delayed payments, 63 per cent say they have a negative effect on their businesses.

Many businesses only review the financial position of their debtors at the beginning of the relationship. This process, however, should be on-going so that it can be considered whether credit should be limited, or security, such as personal guarantees, sought. It is free to download documents from Companies House which is a great benefit and tool that should be used by those who do not use an external credit agency. Once a debt is late, the late payment regulations allow businesses to claim interest (at a rate of 8% above base rate) and fixed fee compensation (dependent upon sum owed) and so it is important that these tools are utilised to enhance the value of such recoveries.

In our experience, the majority of debtors settle upon receipt of a formal letter before action. Therefore, instructing a solicitor or debt recovery agent, who often charge a fixed fee, is another tool that businesses should consider using sooner rather than later. Often the letter before action costs less than the compensation a business would be entitled to under the Late Payments regulations, so it can be a cost-effective method of outsourcing credit control.

Information obtained from - https://www.bacs.co.uk/NewsCentre/PressReleases/Pages/UKSMEsFaceDebtBurden.aspx

Written By Peter Worrall - Moore Blatch