Not getting paid on time can have a very negative impact on an SMEs cash flow, very quickly. Commercial Domestic Investigations are always expressing how effective debt collection can improve your business cash flow and overall financial security.

This week we wanted to discuss new findings from experts at PKF Cooper Parry, which suggest that SMEs are walking away from contract opportunities with firms that they know do not pay invoices on time, in order to improve their financial security.

It appears that late payment can be such an issue now for small businesses that it is now preventing them from perusing new business opportunities. Not just that, but the impact on cash flow also prevents SMEs from investing areas such as equipment and staffing.

The issue of late payment combined with reduction in overdraft facilities available to SMEs makes for a tricky situation to get out of. Recent data suggests that 30 per cent of firms have seen limitations imposed on their overdraft over the past two years, and 17 per cent have had their overdraft withdrawn entirely.

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The impact on cash flow also prevents SMEs from investing areas such as equipment and staffing

Making payment a priority

Ross Cocker, director at PKF Cooper Parry said: “Historically many SMEs chased increased turnover, however, post-recession, the focus has now shifted to promoting stability and sustainable growth. The majority of firms now regard timely payment and healthy working capital as a priority, and as a result, many are boycotting clients that do not pay on time. Improved market conditions, as well as the necessity for businesses to manage their cash flow more effectively, means that a number of SMEs now feel confident enough to walk away from deals with late payers.”

“From April, new legislation will require large companies to publish their payment practices on a biannual basis, including the average length of time the business takes to pay suppliers as well as the proportion of invoices that are paid beyond the agreed terms. This is a really positive step for SMEs and has the potential to promote a cultural change where transparency is expected as standard, putting smaller firms in an even better position to negotiate.”

The real enemy

Cocker added: “Extended payment terms are seen as somewhat of a necessary evil by many firms; 60 or even 90 day agreements can be planned for, and businesses with a sufficiently robust cash flow provision are unlikely to turn down lucrative contracts for this reason alone. It is late payment that is the real enemy.

Uncertainty skews projections and can have a knock-on effect on the day-to-day running of a business. SMEs must address the subject of payment procedures early on, ensuring that they are not held up by administrative loopholes, and that their client is aware of the importance of prompt payment.”

If your business is suffering with unpaid invoices get in touch with Commercial Domestic Investigations for an informal chat about the services we can offer. Our team have the experience and knowledge to help your company recover money owed. Working with our debt collection team gives business owners the peace of mind needed to move forward and get past negative cash flow.

About Commercial Domestic Investigations

Commercial Domestic Investigations are regarded within the debt collection and credit control industry as one of the best credit management companies in the UK. Established in 1988 to support and service all sizes of companies in the field of Credit Management.

Commercial Domestic Investigations have recently featured in the press in The Guardian. To keep up to date with the latest debt collection news make sure to follow Commercial Domestic Investigations on Twitter, LinkedIn and Google+.

We now boast a national client base in excess of 30,000 companies. Commercial Domestic Investigations has grown by listening to clients’ requirements and adapting our services to meet all companies’ needs from Sole Traders, SMES, Ltd and Plus. Please contact us on 08444 159200 for more information.