If you’re an SME owner who’s plagued with late-paying customers, you’re not alone. According to recent research by the Institute of Directors, almost half of all SMEs are in the same predicament.
The Scale of the Problem
Out of 787 business owners surveyed by the IoD, 48% reported having had problems with late payments since April 2017. Many cited “excessively bureaucratic” payment systems as being responsible for the delay, with payments by large businesses to SMEs singled out for “grossly unfair” terms and practices. The survey suggests that about a third of all payments to SMEs are late, with an average value of £6,142.
All this can have a huge impact on SMEs. ” Chasing late payments,” said Edwin Morgan, director of policy at the IoD, “can have a particularly damaging effect on small companies, sapping resources and hurting their productivity.” So what can be done about it?
Small Business Commissioner
Since the end of last year, a complaints handling service has been available from Paul Uppal, the small business commissioner. This was intended to help small and micro businesses resolve payment disputes by offering arbitration, but it doesn’t seem to have been taken up very successfully.
In the IoD’s survey, only 1% of the respondents thought this would be a useful way to go. Whether or not this scepticism is justified, the service doesn’t seem yet to be widely known or trusted. Edwin Morgan commented that ” The government has a job to do to publicise the options that are out there, and we would also urge them to consider stronger measures to clamp down on the menace of late payment.”
Effective Invoicing
All SMEs can help themselves by ensuring they leave no excuses for late payment. Invoices should have all relevant information clearly stated:
- a unique invoice number
- your company’s full name, address and contact details
- full name and address of the client
- the goods or services you’re charging for
- the date they were provided
- the invoice date
- the amount charged
- VAT, if relevant
- the total amount owed
You can set up your own invoice template to include all this, or else you can use online systems like Xero, Sage or Quick Books Online. They all have various templates..
Most late payers will pay up eventually, although that’s no excuse for the stress and damage they cause. Occasionally, though, the debt slides into non-payment. If you have non-paying customers, why not give me a call to discuss how I can help you?
