Late payment leads to redundancies amongst UK firms
More than half of British businesses are being left with no alternative but to suspend work and services in order to protect their cash flows against the continued threat of late payment, research shows.
This hard-line tactic, used by 54 per cent of businesses during 2012 according to Hilton-Baird Collection Services’ Late Payment Survey, is representative of the no-nonsense approach that many are adopting against late paying customers.
This figure is seven per cent higher on an annual basis and one of several credit management strategies that rose in popularity over the same period, including:
* New customer credit checks (used by 48 per cent)
* Writing to debtors, including solicitor involvement (47 per cent)
* Suspending customer credit facilities (45 per cent)
* Small Claims Courts and County Court Judgments (31 per cent)
The commercial debt collection agency’s annual survey also found that six per cent of the businesses surveyed had to make at least one employee redundant last year as a direct consequence of late payment.
One in 20 respondents were also forced to reduce staff working hours and shifts due to their customers’ failure to pay on time, as official statistics from the Office for National Statistics suggest the UK’s unemployment rate increased to 7.9 per cent in the three months to the end of February 2013.
Managing Director of Hilton-Baird Collection Services, Alex Hilton-Baird, believes late payment is therefore having deeper ramifications than many realise: “It is a major concern that people are losing their jobs as a direct result of the cash flow implications of late payment. This country needs people in work for the economy to move forward, but too many employers are finding it increasingly tough to sustain their existing payroll.
“It is encouraging, however, that a firmer stance is being taken by businesses to safeguard their cash flows from late payment. The decision to suspend work is not an easy one given the temptations to chase turnover in light of the shortage in demand that so many sectors are experiencing currently, but businesses aren’t shying away from making tough decisions. This bold approach could prove key to their survival.”