However, new figures published by the Bank of England demonstrate why, as the recession continues, the need for effective credit control measures to be put in place could be increasing, while other sources of funding are diminishing.
The latest BoE figures on lending by banks to businesses show a reduction across the board in the amount of money the UK’s companies have been able to borrow in recent weeks.
Below, we take a look at the figures, some of the reaction to the report, and what companies can do to protect their cashflow, in a climate of reduced availability of third-party funding.
Businesses battered by bearish banks
The BoE data shows seasonally adjusted figures in terms of pounds sterling for the total net amount lent by UK financial institutions to private businesses outside of the financial sector.
In 2012 so far, the net flow of business finance has actually been towards the banks, as companies throughout the UK have paid back more of their loans than has been approved as new lending.
For March, £3.2 billion was paid off, adding to a net figure of £4.2 billion in February and £3.6 billion in January – the total net flow of funding in the first quarter of this year therefore reached £11 billion of business debts cleared, despite talks of easing credit conditions for businesses to make lending easier to access.
This represents a 3.5% fall in lending over the year between March 2011 and March 2012, while the three-month growth rate in business lending stood at -9.4% in annualised terms in March.
By comparison, secured lending to individuals grew modestly over the same period, with 0.8% positive 12-month growth and a 1.1% in three-month annualised terms.
For organisations throughout the UK, the figures indicate that bank financing is becoming, if not harder to gain approval for, then at least a less significant source of funding for many companies.
As with any reduction in finance availability, this raises the need to protect other sources of income – making proactive credit control and effective collection of debts important tools in guaranteeing that a company’s cashflow is not interrupted due to late- and non-payment.
Invoicing and the economy
It’s worth taking a moment to recognise the impact of late payments on any business, even if you feel as though you can cope with subdued cashflow as part of your risk management strategy.
While you may feel confident that your business clients will pay up in the end, you could be losing more than just money in the meantime.
As well as the obvious problems with late invoice payments – the loss of earnings as interest, and the reduction in available funds in the business account – there are also knock-on issues as you cannot put that money to good use in expanding your operation.
In response to the Bank of England figures outlined above, Labour’s shadow minister for small business Toby Perkins stressed the importance of funding for the success of the UK economy as a whole.
“We need businesses to be able to spur growth and create new jobs, but without being able to access the finance they need to grow this won’t be possible,” he said.
If you find you often have several clients who refuse to pay on time – either because their invoices are simply overdue, or because they attempt to negotiate new payment terms – your own business could be suffering, and the economy as a whole, from this lack of investment finance.
How we can help
The Cash Protection Agency offer several services that can help to maximise your invoice income, whether you are taking on new clients, or pursuing non-paying existing customers.
We can offer credit checks to determine the reliability of your potential new customers – particularly if their account is likely to be a large one.
Credit checks provide an insight into how well a would-be client has met their payment deadlines in the past, so you can judge how well they will pay you in future.
Remember, this is a very common tool used by businesses of all kinds to check the reliability of both business and consumer clients, so don’t be afraid that your new customers will take offence to it – you have every right to protect your income, and business clients in particular will be aware of that fact.
The Cash Protection Agency can add ongoing credit control services to your arsenal of income-protection tools, minimising payment delays as far as possible.
We use a combination of techniques to achieve this, following up on invoices issued to ensure they have been received and logged by the client, and adding gentle reminders to any that go unpaid at the deadline date.
It’s always better to recover the money without necessitating legal action, so we employ a firm but gentle approach at the outset, and will seek your authority before taking any more drastic action.
Debt Collection and Tracing
Where you have a client who has already reached the stage of non-payment, our debt collection professionals can pursue them to recover your funds, giving them a chance to clear their debt before embarking on any legal action.
Our debt collection experts work with Edward Hands and Lewis Solicitors in Leicester to pursue any legal issues, so you can rest assured that claims will be properly handled by a well-respected team of local lawyers.
If your debtor has vanished, we can also carry out tracing to track them down and instigate the necessary proceedings to recover the money you are owed.
By combining all of these approaches into a single, joined-up credit control strategy, we can ensure your overall wait for payments is minimised, your exposure to losses reduced, and no non-paying client escapes with your funds, without being brought to justice by our debt collection professionals.
For more information about any one of our services, call us, email us, request a callback or download a claim form now.