HMRC changes could make getting paid even harder
A change in the way that insolvent businesses will settle their debts could make businesses less likely to get paid if a customer goes bust.
From 6th April 2020, HMRC will become a preferential creditor in cases of insolvent liquidations.
This means that any owed tax will be paid first before other creditors, like suppliers and banks, have a chance to reclaim their money.
Currently, employees are the only preferential creditors.
So, if your customer enters insolvency after 6th April your chances of collecting any money could significantly decrease as your business will be further down the queue for payment.
And, with the global trade credit insurer, Euler Hermes, predicting an 8% rise in corporate insolvencies this year, it’s an important reminder for businesses to act on any aged invoices quickly.
So what can you do?
Take action now
When it comes to late payment speed is often key to getting your money, as research shows that the longer an invoice remains unpaid the less likely it is to be paid.
So, if you have any older invoices still waiting for payment, it’s important that you act quickly to get ahead of the other creditors just in case the customer is struggling financially and might be on the brink of going bust.
One popular strategy amongst our clients is to outsource the collection of those invoices which reach a certain age, or when internal attempts to recover payment continue to fall on deaf ears.
This can be a great way of not only increasing the chances and speed of recovery, but also allowing your business to refocus on newer invoices and ensuring they don’t also grow particularly overdue.
If you think you might benefit from this approach, see how much we would charge for successfully recovering your unpaid invoices here.
Get to know your customers
These changes and the current economic climate make it more important than ever to know who you are offering credit to.
Therefore, it’s vital to always get to know your customers before offering credit terms.
You can do this by using account opening forms to collect information and performing credit checks on all customers.
Protect your cash flow
You can protect your cash flow from late payments and bad debt by utilising credit insurance.
If an invoice becomes aged or a customer enters insolvency proceedings, credit insurance ensures that you get paid for any goods or services you have supplied, subject to a designated credit limit.
Credit insurance can be provided as a standalone product or as part of an invoice finance facility, which additionally reduces the cash flow impact of trading on credit terms by releasing up to 90% of an invoice’s value within 24 hours of its issue.
To discover the best options for your cash flow needs visit our sister company, Hilton-Baird Financial Solutions
Can we help?
If your business is struggling with late payment and you’d like to discuss your debt collection requirements, please contact our team on 0800 9774848 or get a quote to see how much we would charge for successfully collecting your overdue payments.