The ugly truth about late payment
The impact late payment has on a small business’s cash flow is well documented but often the negative effects spread much further than company finances.
The Guardian recently reported about a pregnant business owner who suffered a great deal as a result of late payment. This isn’t an isolated case.
As a debt collection agency we talk to business owners on a daily basis who have been negatively affected by late payment – both professionally and personally.
Some of the common complaints we hear include:
Personal finance troubles
When suppliers fail to pay, business leaders are often left with no choice but to make up the shortfall from their own pocket and, as a result, they reduce their own salary or do not take any pay at all. Particularly in the smallest of businesses, getting paid late not only stops the business from being able to meet its commitments but it could prevent the business owner from meeting personal commitments too.
Stress and anxiety
The late payment of invoices is also causing owners and directors of SMEs stress-related problems, which is backed up by the results of an International Association of Bookkeepers survey. The research showed that late payment can have a detrimental impact on personal health, with many business owners suffering from anxiety and depression as a result of the cash flow pressures brought to bear on their businesses through late payments.
With the negative impacts of late payment spilling over into personal finances and health, it’s not surprising that sometimes this can have a knock-on effect on relationships outside of the workplace too. When under intense pressure from late payment some business owners find themselves struggling to socialise and maintain personal relationships. This then contributes to the stress and anxiety mentioned above, creating a vicious cycle that can be difficult to navigate away from.
So it’s clear to see that, when hit by late payment, the negative impacts are far-reaching. Yet many businesses continue to pay late and contribute to the problem.
But, what’s the solution?
The government has put the onus on getting larger businesses to improve their payment practices with initiatives such as tougher payment reporting and a small business commissioner to be introduced.
However, with the reporting plans already delayed until October, and the results of these initiatives still unknown, it’s time for businesses to take action themselves.
Reducing the impact and likeliness of late payment starts with credit control. Creating an efficient and effective credit management procedure is key to making sure your money is coming in on time and limiting the impact it has on your cash flow when it does. Our credit control tips section offers lots of helpful ways your business can improve its procedures.
Can you relate to any of the issues mentioned above? Please share your experiences in the comments below.
Or, if your business is still struggling with late payment, contact us today on 0800 9774848 or firstname.lastname@example.org to see what we could do to help your business.