According to the latest survey of credit professionals, two in three of businesses are now directly affected by late payments. The latest research conducted amongst members of the ICM by Equifax, reveals that nearly 50 percent of businesses have seen late payments rise this year, with 58 percent chasing payments quicker than they were 12 to 18 months ago.
Whilst it’s understandable that businesses need to protect their cashflow, both organisations are concerned that the continued growth in late payments is actually putting pressure on businesses that pay on time.
Mark Nuttall, Director, Equifax Commercial and SME says 40 percent of respondents said they chase invoices before they become due: “Whilst this doesn’t necessarily mean customers have to pay early, we’re concerned that businesses are withdrawing or aren’t offering the best credit terms to organisations that are good payers, potentially stifling trade and growth in the economy.
“Doing credit checks on new customers should be a ‘given’ in today’s economy”, Mark continues. “But organisations also need to utilise monitoring tools to stay alert to changes on existing customers’ financial status. In this way, they can set the right credit terms from the outset as well as applying collections resources and strategies specifically to those companies that are most likely to pay late, rather than applying a broad ‘chasing’ approach to all customers.”
Philip King, Chief Executive agrees and says late payments continue to be a major threat to businesses in an already fragile economy: “More than two thirds (64 percent) of respondents said they think the Government should take action to protect small businesses against the negative effects of late payments. But we are also urging business owners to tackle the late payment culture head-on by improving best practice. This way, we can reduce the impact of bad debt and help businesses begin to thrive again, ending this damaging cycle of needlessly late payment.”