A good credit control debt policy will help you to bring in more of your outstanding invoices on time, reducing the average number of days it takes you to get paid, and lowering your total amount owed.
New figures from ABFA, the Asset Based Finance Association, show just how much UK small businesses are owed at present – and remember, by SMEs, ABFA means private companies with turnover below £25 million.
Based on financial returns filed at Companies House, ABFA found a total of £67 billion in outstanding invoices at any one time, and that is only for firms whose annual returns itemise their trade debt as an exact value.
The real amount owing could be anywhere upwards of that figure, as in many annual returns it is simply impossible to tell how much the company is waiting to be paid.
Over the past year, the total has grown by 8%, while since 2011 it is up by 36% from less than £50 billion.
SMEs in general are now being paid in 72 days – even longer than at the peak of the recession in 2009, when the typical payment took 61 days.
Jeff Longhurst, chief executive of ABFA, said: “The scale of unpaid invoices to Britain’s SMEs has become enormous, but there is no reason for it to become a barrier to investment and growth.”
ABFA recommend invoice finance – where the money owed is paid out by a third party as a form of credit, in return for taking a fee when the invoice is eventually settled.
But this leaves SMEs paying the price for late payment, whereas an effective credit control debt policy can actually turn overdue invoices into a profitable asset.
Far from paying the penalty for non-paying clients, your credit control debt policy could allow you to add statutory interest and other fees on to the total amount owing to you.
Combined with formal debt recovery proceedings, there is no reason to think you will not get paid in full – and this in turn sends out a clear message to future customers that prompt payment is a necessity, and not just a favour from them.