The Business Battle-axe, Amanda Vigar of Darlington accountants V&A Vigar & Co (Darlington), is backing government plans to ‘name and shame’ persistent late payers, following news that a scheme to ensure small companies get paid on time is not working.
A YouGov survey says that as many as 85% of small and medium have recently experienced late payment problems. The Government is currently considering a range of measures to compel companies to pay on time and will even name and shame those who fail to do so to highlight bad records of payment.
Amanda Vigar, managing partner at V&A Vigar, said: “It is extremely worrying that the government-backed Prompt Payment scheme appears to have failed. Although there are rules in place that compel bigger companies to pay more quickly, smaller firms are reluctant to use them for fear of losing their client.”
Amanda Vigar, who has a regular blog at http://businessbattle-axe.blogspot.co.uk/, says that “Small businesses are the life blood of our economy and cash flow is the livelihood of small businesses.” The Government has announced that it is planning to consult small and medium sized businesses later this year on the way forward for the late payment problem.
“The idea that persistent late payers can be named and shamed to increase transparency and to force them to pay up on time is an excellent one. It could not come too soon, in my opinion. Late payment causes so many problems for small businesses and can literally mean the difference between paying and not paying staff. For even smaller companies, it can sometimes mean the difference between continuing in business and going under.
“The problem is that big companies find every excuse to delay payment saying they have long authorisation processes and that it's missed deadlines. Basically, they can say anything to get around not paying!”
Amanda added: “In the meantime, there are several things that smaller businesses can do to get paid on time.”
• Check payment runs - find out when customers make payment runs and what the cut off is.
• Set credit terms – Small companies should set short terms - seven days not 60 days. You should have a clear collection policy in place outlining credit terms, how you will collect money and any overdue payments.
• Make invoices clear – having a good system in place to record invoices is key. There are many software packages available so you can also track payments. Remember also that, the last time a company can object to an invoice they receive is on the day they receive it. After that time, they cannot quibble and dispute it.
• Follow customer instructions – large companies in particular often have strict systems for paying. Maybe they want a special invoice number – so make one for them. Also ensure that it’s consistent throughout your communications to avoid confusion.
• Follow up promptly – Make sure you have a consistent collection procedure and always follow up as promptly as possible. Keep a close eye on patterns in which clients generally pay; and ask yourself whether this fits in with your billing cycle? If the client does not pay ten days after the invoice is due, send them a ten-day letter re-iterating the fact that the invoice is due and (politely!) asking for payment.
• Finally, always be polite – Shouting threats is not going to do you, or your business, any favours.