An increase in Late Payment causes concern for Businesses
Latest figures indicate that companies are increasingly slower in paying invoices.
According to Allianz, one of the world’s biggest insurance companies, credit is set to become more expensive and in shorter supply as companies become slower in making payments which raises liquidity risks and may push more companies into problems with cashflow.
Operational costs as a proportion of turnover have hit their highest level since the financial crisis and late payments continued to rise last year, with nearly a fifth of businesses worldwide reporting that typically they were paid for their services after 90 or more days.
The rise in late payments is one of many factors that have led to the rising costs of running a business. A reduction in growth, climbing inflation, as well as the higher cost of financing and more non-payments have all contributed.
The rising cost of running a business has slowed the pace of the post-pandemic recovery for many countries. Its thought Britain now faces a liquidity gap of around £570 million, with a global liquidity gap of £24.2 trillion, according to experts.
Figures recently published by Bibby Financial Services, which provides financial services to small and mid-sized businesses, found the average level of “bad debt”, where a company suffers because their clients fail to pay the full sum invoiced, had risen by 61% over the past twelve months.
Smaller companies have an average of £16,000 of bad debt which is an increase from last Spring of around £6,000.
On average 6 out of 10 businesses say that customers are taking longer to pay invoices in full.
Businesses that are owed money and seen a late payment increase are urged to take professional debt collection measures.
Providing your customer with clear payment terms so that your customers know when to expect invoices to be issued, and when you expect them to be paid will help you avoid late payments and disputes with your customers.
As soon as the payment deadline is passed, commence recovery action without delay. Your debtor may continue to provide you with excuses for why their payment is late, but any delay in chasing your payments can impact your business cashflow as well as successful recovery.
If you have any queries about debt recovery, please contact Allison Thompson on 0191 2267878.