Late payment has an obvious impact on small businesses’ cash flow, but when an overdue invoice falls near a tax deadline, that impact can be compounded significantly.
For example, July 31st marks the deadline for many self-assessed taxpayers to make their next installment on account, putting their cash flow under a pinch point of pressure.
But for those who pay VAT, late payments can be even more significant still, as VAT is payable on invoices issued, rather than on payments received, says business finance platform Funding Options.
CEO Conrad Ford said: “Although HMRC does attempt to resolve issues with businesses, it can only wait so long if arrears are building.
“SMEs need to plan ahead to identify ways that they can manage their cash flow more effectively, such as alternative finance to spread the cost and mitigate the risk of major financial shocks such as bad debts.”
Of these, 1,887 were successful, meaning the business was wound up and its assets sold off to raise the funds needed by HMRC to clear the tax bill.
This is a 4% increase on the 1,816 successful applications made in the previous year, and it is perhaps worth noting that the figures relate to the calendar year, rather than the financial year.
With the July 31st tax deadline approaching, there may still be time left to force the hand of any debtors who owe you a substantial sum and have not yet paid.
Doing so now can boost your cash flow before your payment on account goes out, and also helps to avoid rolling over those bad debts into the next half-year of tax, making the end of the month a sensible cut-off point by which to try and have everything up to date.
For more information about cash flow please read our blog, “How does cash flow benefit from credit control?” or talk to a member of our team about any of our services please call 0808 256 5012.