Recent research from the British Chambers of Commerce (BCC), Funding Circle and MBH Corporation has revealed that SMEs are concerned about gaining access to funding. The last eighteen months have been a difficult time for many SMEs, with the next few months ahead still looking uncertain. The anticipated closure of the furlough scheme and reintroduction of winding up petitions are causing concerns for many businesses owners. And on top of that, late payments are causing issues for SMEs accessing funding. We’re going to be taking a look at the research and what can be done to help SMEs navigate through a potentially challenging future.
The research from the BCC and Funding Circle found that many of the respondents are concerned by the unknown trajectory of the current coronavirus pandemic, the potential for a rise in inflation and difficulties with recruitment. Easy access to finance would help many businesses to overcome their concerns, and even head towards a path of growth, over 44% of the respondents agreed with this statement. This was reinforced by a survey conducted by MBH Corporation, an investment holding company, which found that one in three SMEs are looking to borrow to fund growth plans.
But over 40% of the respondents were concerned that access to funding is going to become harder over the next three years, directly as a result of late payments, hampering plans to grow sales or recruit. Unfortunately, according to the European Payment Report 2021, 62% of the UK firms are worried about clients’ paying on time and 46% stated the delay in payments is causing a tangible risk to the growth of their business.
The government has attempted to mitigate the widespread issue of late payments by tightening up the Prompt Payment Code. We already know that there is over £23bn owed to business in late payments. The Prompt Payment Code has been reformed to reduce the accepted payment days from large to small businesses from 60 down to 30.
The Prompt Payment Code only applies to businesses who have actively signed up, so, unfortunately, not all small businesses will benefit from the reforms. So what can be done to help SMEs tackle the late payment problem and embark on a journey of growth?
My Debt Recovery Director, Sean Husband, gives us his top tips to help businesses who are struggling to chase overdue invoices:
- Communication with debtors is vital. It’s important to keep records of communication, these may be useful in future debt collection proceedings.
- It is so important for businesses to ensure that their payment terms are clear and understood by their customers.
- Follow up after invoices have been sent. Many invoices are left unpaid because they are missing vital information that your customer needs to process payment, or sometimes there is a dispute with the invoice and it is just clogged up in their system, waiting for someone to call you to discuss.
- Your business is within its rights to charge interest on unpaid invoices. This can act as an incentive for businesses to clear their debts. If you already have a provision for charging interest in your payment terms then it is wise the leverage them. If you don’t then, as a result of the Late Payment of Commercial Debts Act, you are able to charge interest of 8% above the Bank of England base rate.
- Engage with professionals, to save time, hassle and allow experts to handle your situation.
That final point is perhaps the most important of all. There may come a time when you or your internal team have hit a brick wall and the debt is no closer to being collected. This is when it’s the perfect time to reach out to a commercial debt recovery firm like My Debt Recovery. Our team will work with you to discover the best course of action with your debtors. We will work towards an amicable resolution, if possible, and enable you to continue working with your customer should you so wish. If an amicable resolution is not forthcoming, then we are able to leverage certain tools to progress the situation. Take a look at our debt recovery process here.
So, if your business is keen to grow, but hampered by unpaid invoices, then contact the My Debt Recovery team today to find out how we can help you.