Chasing overdue invoices is a perennial burden for the UK’s freelancers and contractors, despite the Government’s attempts to reform the country’s troublesome corporate payment culture. Business Secretary Vince Cable recently promised to “name and shame” companies with lengthy payment terms by making it mandatory for firms to publish their standard terms online. The Government’s Prompt Payment Code initiative, despite having many FTSE 500 companies signed up, has failed to make an impact – a recent study showed UK companies are owed on average £31,000 in outstanding invoices.
A separate study, published earlier this month by credit control software firm Satago, has now revealed how skittishness over enforcing credit terms is aiding runaway late payments.
The research took in the views of almost 400 small business owners across the UK and found that a massive 81% are reluctant to pursue late invoices because “they find the process uncomfortable”, while almost 20% worry that they will annoy their clients if they chase owed payments.
The respondents are less than enthusiastic about the Government’s attempts to tackle late payment – 17% believe there has been an improvement, while 24% report their cashflow situation has deteriorated.
The cause of these credit control woes becomes obvious further into the study – almost 8 in 10 firms (77%) do not have a dedicated credit controller or bookkeeper looking after their payments.
CEO of Satago Steven Renwick commented:
“Despite losing out on thousands of pounds every year our research shows that SMEs are struggling to deal with late payments. SMEs feel uncomfortable chasing, do not want to annoy customers and a majority do not have a process in place to deal with the situation.
“The current supplier power structure means that big business is in a position to take advantage of SME and freelance suppliers. SMEs must recognise that proactivity can help them deal with late payers: Get a process in place, use the law and work with a third party to remove the distress of chasing.”
Image by James Cridland