As we approach the Self Assessment deadline on the 31st of January, it’s becoming increasingly important for small businesses to receive outstanding payments from their customers and to chase any that are late.
Back in December, Business Secretary, Grant Shapps, announced an in-depth review into tackling late payments to small businesses. This is hoped to curb the disadvantage SMEs are facing as a result of larger businesses paying them late. As it stands, UK small businesses are currently owed £23.4 billion in outstanding invoices. Such frequent late payment for services is described by Shapps as ‘intolerable’. He further explains how it ‘presents a real barrier to productivity, the creation of high-skilled jobs and ultimately economic growth.’
It’s understandable that the process of chasing payments from customers can be an uncomfortable process. However, when customers fail to pay for services on time, it begins to cause cash flow problems for small businesses. Eventually, this will be reflected in their ability to pay taxes on time! Not only this, but the time and resources invested in chasing late payments will negatively impact business turnover, impacting the capability for growth and longevity in the industry.
What can small businesses do to discourage late payments?
Although the responsibility of payment ultimately lies with the customer, it may be helpful for small businesses to have procedures in place, which will encourage customers to pay on time. Having a timetable of stages in the business transaction where you can remind the customer about payment may be helpful.
This could include:
- Checking the customer has received their invoice
- Reminding them a few days before payment is due
- Asking if there has been a problem a couple of days after it is due
- Reminding at regular intervals
- Warning the customer of next steps in the event of further delay.
Alongside this, the government’s Payment and Cash Flow review will make it harder for larger companies to avoid paying SMEs, as Shapps explains that he wants to, ‘remind big businesses of their duty to ensure their smaller suppliers are paid promptly.’
If you would like more advice about how to tackle late payments for customers, or about the Self Assessment deadline, get in touch with Chris Barlow:
+44 (0) 1 942 816 512
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