The advice, which has been created in conjunction with the Institute of Credit Management (ICM), outlines what businesses can expect when they sign up to the Prompt Payment Code.
To read the leaflet go to:
http://www.icm.org.uk/PDFBin/188-075%20BERRpayingontimelft-web.pdf
www.ukba.co.uk
Showing posts with label debt. Show all posts
Showing posts with label debt. Show all posts
Wednesday, 27 May 2009
Sunday, 24 May 2009
Small companies in the UK are owed £10bn in outstanding payments
The report by Barclays Local Business reveals that on an average day small businesses are left £2,440 out of pocket as a result of suppliers or customers failing to pay up during the standard 30-day invoicing period.
The figure is up £1.7bn on last year and means that small companies have lost out on £5bn over the last twelve months.
"Despite some recent positive economic signs, it's concerning that late payments are on the rise. This is a serious issue for the businesses we talked to with around a third saying it threatens their day-to-day survival," said John Davis, marketing director for Barclays Local Business.
www.ukba.co.uk
The figure is up £1.7bn on last year and means that small companies have lost out on £5bn over the last twelve months.
"Despite some recent positive economic signs, it's concerning that late payments are on the rise. This is a serious issue for the businesses we talked to with around a third saying it threatens their day-to-day survival," said John Davis, marketing director for Barclays Local Business.
www.ukba.co.uk
Sunday, 17 May 2009
Small firms reluctant to chase late payments
Over three-quarters of small firms are reluctant to chase payments through the courts despite knowing about their rights to do so and about rights to charge interest on late payments. That's according to research by Cattles Invoice Finance, which interviewed 300 small business owners. The research also revealed that one of the main reasons given by small firms for not charging interest or taking legal action was the potential damage it could cause to their relationship with clients.
www.ukba.co.uk
www.ukba.co.uk
Saturday, 21 March 2009
The Late Payment Cycle
Despite the Late Payment legislation UK businesses are taking the longest time on record to pay their bills.
Businesses are currently taking over two months to settle their debts according to the credit checking company Experian. This is an increase of two days in the last year.
As usual the larger companies are taking longest with an average of 82 days and smaller companies now averaging over 61 days. However it is usually the smaller companies who are most likely have cashflow problems.
The industries who have increase their payment days most are:
Electricity,
Property,
Pharmaceuticals,
Beers, Wine and Spirits,
Oil and Gas have all increased by over five days.
The longer a company takes to pay the their invoices could be an early warning indicator to cashflow problems. If you are running a business then you need to monitor the speed at which your customers pay their bills, because while the invoice is unpaid the money is at risk.
Remember a sale is not a sale until the invoice is PAID.
If the invoice is not paid then the money is at risk and could be lost.
Therefore businesses should press harder to be paid on time with in the terms of the agreement. Companies are all under pressure to hold onto cash for as long as possible.
This can lead to a battle of wills between the credit controller of the supplier and the purchaser ledger manager of the customer.
The figures indicate that the late payment culture is getting worse.
This can lead to a battle of wills between the credit controller of the supplier and the purchaser ledger manager of the customer.
Businesses should not be acting as an unpaid bank for their customers.
www.ukba.co.uk
Businesses are currently taking over two months to settle their debts according to the credit checking company Experian. This is an increase of two days in the last year.
As usual the larger companies are taking longest with an average of 82 days and smaller companies now averaging over 61 days. However it is usually the smaller companies who are most likely have cashflow problems.
The industries who have increase their payment days most are:
Electricity,
Property,
Pharmaceuticals,
Beers, Wine and Spirits,
Oil and Gas have all increased by over five days.
The longer a company takes to pay the their invoices could be an early warning indicator to cashflow problems. If you are running a business then you need to monitor the speed at which your customers pay their bills, because while the invoice is unpaid the money is at risk.
Remember a sale is not a sale until the invoice is PAID.
If the invoice is not paid then the money is at risk and could be lost.
Therefore businesses should press harder to be paid on time with in the terms of the agreement. Companies are all under pressure to hold onto cash for as long as possible.
This can lead to a battle of wills between the credit controller of the supplier and the purchaser ledger manager of the customer.
The figures indicate that the late payment culture is getting worse.
This can lead to a battle of wills between the credit controller of the supplier and the purchaser ledger manager of the customer.
Businesses should not be acting as an unpaid bank for their customers.
www.ukba.co.uk
Sunday, 1 February 2009
Dealing with bad debts
On average small and medium sized businesses write off £14,000 in bad debts each year, according to the Credit Management Research Centre. If they have a 5% profit margin that means they need additional sales of £280,000 just to make up for this loss.
Think about how a bad debt could impact on your business. How much extra turnover would you need to cover this loss? And would your businesses be able to survive?
Prevention is best
• Know your customer – a simple check with Companies House can confirm they are who they say they are and enable you to check their accounts.
• Check they are a good risk – by checking with a credit reference agency, by asking for bank and trade references and by searching the Registry of County Court Judgments to reveal if those running the business are in financial difficulties.
• Set clear credit limits for every customer – to limit potential losses.
• Consider credit insurance – it will cover the debts owed to you.
Watch out for warning signs
• Mistakes on cheques – they forget to sign, words or figures differ, or cheques are wrongly dated. These may be genuine errors or may be a means of buying extra time.
• Constant queries – about the product or service or about the invoice. Again these could be delay tactics.
• Excuses – like the cheque is in the post.
• Rumours – staff often pick up on these first.
• Trading at their credit limit – if a customer is continually trading up to the limit or asking to exceed it, it should ring alarm bells. However, it may be that they are buying more from you and so need an increased limit.
When faced with a late payment that could become a potential bad debt
• If it’s won’t pay, is it worth the fight? If you are going to get nothing back, don’t waste your time or money.
• If there is a chance they will pay, consider court action – but send a solicitor’s letter first. In around half of cases this works. You can use an online service to send a solicitor’s letter ‘before action’ for as little as £5.If that does not do the trick then you can start proceedings. For debts over £750, you can issue a statutory demand. Alternatively try the Small Claims Track (for debts up to £5,000) or the fast-track procedure in the County Court (for claims up to £15,000). The Small Claims limit in Scotland is £3,000.
For more information go to Business Debtline at www.bdl.org.uk or call 0800 197 6026.
If the worst happens: talk to your bank if you need additional funding and tell HMRC – you may be able to reclaim the VAT on bad debts.
The other side of the coin
Cashflow does not just involve getting money into the business. The other side of the coin is paying money out.When the economy takes a downturn suppliers may want to protect their financial position by:
• Reducing the amount of trade credit they will advance you
• Asking for payment more quickly
• Asking for stage payments or even cash on delivery
• To ensure that you are not being squeezed on both sides you need to manage this side of the cashflow equation and remain a low risk for your suppliers.
• Make sure you know when you are expected to pay – not all suppliers have clear terms and conditions.
• Pay on time – and if you can’t do so, contact your suppliers to explain why.
Protect your credit rating – don’t wait until the start of court proceedings to pay.
• Once your credit rating is damaged, you may find it hard to get any credit at all.
• Try to negotiate longer payment terms if you are finding your customers are taking longer to pay you – if not, see if you can get a discount for prompt payment.
[Extract from Trading Through The Economic Downturn - published by NatWest - full Guide available by clicking here]
http://www.ukba.co.uk
Think about how a bad debt could impact on your business. How much extra turnover would you need to cover this loss? And would your businesses be able to survive?
Prevention is best
• Know your customer – a simple check with Companies House can confirm they are who they say they are and enable you to check their accounts.
• Check they are a good risk – by checking with a credit reference agency, by asking for bank and trade references and by searching the Registry of County Court Judgments to reveal if those running the business are in financial difficulties.
• Set clear credit limits for every customer – to limit potential losses.
• Consider credit insurance – it will cover the debts owed to you.
Watch out for warning signs
• Mistakes on cheques – they forget to sign, words or figures differ, or cheques are wrongly dated. These may be genuine errors or may be a means of buying extra time.
• Constant queries – about the product or service or about the invoice. Again these could be delay tactics.
• Excuses – like the cheque is in the post.
• Rumours – staff often pick up on these first.
• Trading at their credit limit – if a customer is continually trading up to the limit or asking to exceed it, it should ring alarm bells. However, it may be that they are buying more from you and so need an increased limit.
When faced with a late payment that could become a potential bad debt
• If it’s won’t pay, is it worth the fight? If you are going to get nothing back, don’t waste your time or money.
• If there is a chance they will pay, consider court action – but send a solicitor’s letter first. In around half of cases this works. You can use an online service to send a solicitor’s letter ‘before action’ for as little as £5.If that does not do the trick then you can start proceedings. For debts over £750, you can issue a statutory demand. Alternatively try the Small Claims Track (for debts up to £5,000) or the fast-track procedure in the County Court (for claims up to £15,000). The Small Claims limit in Scotland is £3,000.
For more information go to Business Debtline at www.bdl.org.uk or call 0800 197 6026.
If the worst happens: talk to your bank if you need additional funding and tell HMRC – you may be able to reclaim the VAT on bad debts.
The other side of the coin
Cashflow does not just involve getting money into the business. The other side of the coin is paying money out.When the economy takes a downturn suppliers may want to protect their financial position by:
• Reducing the amount of trade credit they will advance you
• Asking for payment more quickly
• Asking for stage payments or even cash on delivery
• To ensure that you are not being squeezed on both sides you need to manage this side of the cashflow equation and remain a low risk for your suppliers.
• Make sure you know when you are expected to pay – not all suppliers have clear terms and conditions.
• Pay on time – and if you can’t do so, contact your suppliers to explain why.
Protect your credit rating – don’t wait until the start of court proceedings to pay.
• Once your credit rating is damaged, you may find it hard to get any credit at all.
• Try to negotiate longer payment terms if you are finding your customers are taking longer to pay you – if not, see if you can get a discount for prompt payment.
[Extract from Trading Through The Economic Downturn - published by NatWest - full Guide available by clicking here]
http://www.ukba.co.uk
Managing your cashflow
‘Cash is king’. It is a cliché – and like many clichés it is true. The reason why most businesses fail is that they run out of cash to pay their bills. They run out of cash because they have failed to keep on top of cashflow.
To keep in control of cashflow businesses need to have the right management information and systems in place – and to act on warning signs before they become problems.
Of course all businesses have systems in place. It is just that in an economic downturn these may need to be tightened, particularly as 8 in 10 businesses say they are seeing an increase in the number of their customers paying late.
Remember being paid – and paid on time – is not a given
• If you are worried about the customer paying on time – or at all – consider stage payments or even cash on delivery to reduce your risk of bad debts
• Set your terms of business before doing business – and put them in writing. You will not be paid in 30 days unless your customers know that’s what you expect
• Do credit checks before doing business – and monitor late payments. If companies are taking longer and longer to pay, find out if there is a problem. Do not wait until they leave you with a bad debt
• Encourage prompt payment. Consider charging interest on late payments (your legal right on debts outstanding after 30 days) or – if your profit margins allow – offering a discount for prompt payment
• Invoice promptly – and once again make payment terms clear
• Check the customer is happy – there may often be a reason for late or non payment. Never give a customer a reason not to pay
• Make it easy for them to pay by offering as many ways of getting paid as you can. BACS payments are fast and attract lower bank charges. Or a standing order can be used if they pay the same amount regularly. With cheques your late payers can always use the excuse “it’s in the post”
• Contact customers to check they received the invoice and then find out when they are going to pay
“The key thing is certainty – knowing when you are going to get paid so that you can adjust your cashflow forecasts accordingly. If you know a customer is going to take 75 days to pay, you can plan ahead. If you expect payment with 30 days and the payment takes 75 days your business risks running out of cash to pay its outgoings – and that is when businesses run into difficulties.”
Phillip King, Director General, Institute of Credit Management.
Smart credit management is…
• Ringing on day 40 to check you will be paid on day 60
Lax credit management is…
• Waiting until day 65 to ask why you were not paid on day 60
Getting it right
• Many businesses concentrate on getting orders in, but getting paid should also be a priority
Communication is key
• At times like this you need to cement your key relationships with customers – as well as your suppliers and your bank – as this could be vital to the survival of your business. It is not just about keeping customers happy. It is about working together and understanding their needs. Good communication will also help you to find out if
they are having problems that could impact on your business.
[Extract from Trading Through The Economic Downturn - published by NatWest - full Guide available by clicking here]
http://www.ukba.co.uk
To keep in control of cashflow businesses need to have the right management information and systems in place – and to act on warning signs before they become problems.
Of course all businesses have systems in place. It is just that in an economic downturn these may need to be tightened, particularly as 8 in 10 businesses say they are seeing an increase in the number of their customers paying late.
Remember being paid – and paid on time – is not a given
• If you are worried about the customer paying on time – or at all – consider stage payments or even cash on delivery to reduce your risk of bad debts
• Set your terms of business before doing business – and put them in writing. You will not be paid in 30 days unless your customers know that’s what you expect
• Do credit checks before doing business – and monitor late payments. If companies are taking longer and longer to pay, find out if there is a problem. Do not wait until they leave you with a bad debt
• Encourage prompt payment. Consider charging interest on late payments (your legal right on debts outstanding after 30 days) or – if your profit margins allow – offering a discount for prompt payment
• Invoice promptly – and once again make payment terms clear
• Check the customer is happy – there may often be a reason for late or non payment. Never give a customer a reason not to pay
• Make it easy for them to pay by offering as many ways of getting paid as you can. BACS payments are fast and attract lower bank charges. Or a standing order can be used if they pay the same amount regularly. With cheques your late payers can always use the excuse “it’s in the post”
• Contact customers to check they received the invoice and then find out when they are going to pay
“The key thing is certainty – knowing when you are going to get paid so that you can adjust your cashflow forecasts accordingly. If you know a customer is going to take 75 days to pay, you can plan ahead. If you expect payment with 30 days and the payment takes 75 days your business risks running out of cash to pay its outgoings – and that is when businesses run into difficulties.”
Phillip King, Director General, Institute of Credit Management.
Smart credit management is…
• Ringing on day 40 to check you will be paid on day 60
Lax credit management is…
• Waiting until day 65 to ask why you were not paid on day 60
Getting it right
• Many businesses concentrate on getting orders in, but getting paid should also be a priority
Communication is key
• At times like this you need to cement your key relationships with customers – as well as your suppliers and your bank – as this could be vital to the survival of your business. It is not just about keeping customers happy. It is about working together and understanding their needs. Good communication will also help you to find out if
they are having problems that could impact on your business.
[Extract from Trading Through The Economic Downturn - published by NatWest - full Guide available by clicking here]
http://www.ukba.co.uk
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