Look back in anger
As the Government launches a new initiative to tackle late payment to SMEs (small and medium-sized enterprises), figures from debt-recovery law firm Lovetts have revealed that during 2011, in the face of economic uncertainty, many have radically changed their attitude to debt and took action to tackle late payers.
For instance, over the course the of the year, the time from invoice to threat of legal action was slashed by 18.5 working days. Further, the size of the average payment being chased rose almost 17%, suggesting that businesses were focusing their efforts on the biggest debts and those which would have the most impact on their cashflow.
“The fact of the matter is,” says Charles Wilson, Chairman and Managing Director of Lovetts, “that all businesses are looking to delay payment for as long as possible while putting on the pressure to be paid themselves. There’s no doubt: the customer who pays late is no longer king – they are a drain on cashflow.”
He recommends some key steps all we should all be taking to protect ourselves through this difficult period:
• Check out the credit history of a potential new customer
• Stating quite clearly on your contract the terms of payment and policy for overdue payments. For example, making a legal claim for the amount overdue and any interest payable on top of this, plus the legal costs incurred through chasing up the overdue payment.
• Most importantly, stick to your guns and enforce this policy. If these are not followed through they will be ignored in future and the next invoice will go to the bottom of the pile.
Strong words. And, particularly for freelancers, it can be a balancing act between not scaring your customers off and making sure you’re paid.
FYI for all those wondering how to find out more about late payment The Forum for Private Business is running a campaign against late payment to small businesses which is backed by Freelance Trade Association PCG. PCG also host a number of useful resources and tips to deal with late payment on www.pcg.org.uk
