SMEs Advised to Get on Top of Late Payments

Following the news that some of the biggest companies in the UK are failing to pay invoices on time, Stafford based accountants and business advisers Dean Statham are advising local SMEs to look at their own accounts to see if they are being restricted by a late payment culture.

By ignoring poor payers, including very large companies, a business risks serious cash flow problems. The warning comes after Accountancy Age reported that Tesco, the UK’s biggest retailer, paid only 67 per cent of its invoices below the value of £5,000 within the terms.

Jeremy Hodgkiss, Partner at Dean Statham regularly provides advice to business owners on how to implement a good credit policy to ensure payments are made on time. He says, ‘With such large companies failing to pay their SME suppliers on time it really highlights the problems that small and medium sized businesses endure daily with the late payment culture we are seeing in this country. Unfortunately it seems that it’s now up to the company to implement secure and stringent payment terms rather than simply assuming invoices will be paid.

‘Few companies can hope to trade today without offering some kind of credit to their customers. There are always risks in effectively lending money; one is the risk of bad debt and the other is late payment or the ‘slow payer’ which can have a detrimental effect on a company’s cash flow. All organisations, however large or small, should have a credit policy which complements any documented Terms and Conditions. The credit policy provides internal and external controls to ensure that selling and collecting on credit are handled efficiently.’

Jeremy adds, ‘Cash flow is the lifeblood of any company and good management of this process must be taken seriously. Preparing an annual cash flow forecast can help identify potential problem areas and regular monitoring of the forecast will then allow companies to plan ahead and make allowances as appropriate for cash.’