Q3 2013 Sees 30% Increase In Late Payments Chased By Businesses
Latest analysis from Lovetts shows invoice payment still being neglected despite business improvement www.lovetts.co.uk
Following recent news from the FPB that business costs are rising 3.5% ahead of inflation,* data analysis from Lovetts PLC, the law firm specialising in commercial debt recovery, shows that businesses are also struggling to get back money owed to them by customers. The FPB research showed that late payments have had a detrimental effect on 81% of businesses, clearly demonstrating the size of this issue.
The latest analysis of Lovetts client transaction data shows that whilst trade appears to be improving for many, with evidence pointing to higher volumes of transactions, the number of overdue invoice payments being chased has also increased. The number of Letters Before Action Lovetts issued on behalf of its clients in Q3 2013 increased by a hugely significant 30.9% compared to the same period in 2012.
Charles Wilson, Chairman of Lovetts, comments: “It is encouraging to see that commerce is improving for many of our clients, but this improvement is being hindered by the failure to secure payment in a timely way, evidenced by the dramatic increase in number of debts we are chasing for our clients. Companies of all sizes are affected by late payment and this can force them into delaying making payments themselves. It’s a vicious circle of late payment which needs to be broken, and the best time to do this is at the outset of a new relationship or at the point of contract renewal when terms and conditions are reviewed.
“We always advise clients to stipulate clearly in their terms of business what will happen if and when an invoice becomes overdue, and to discuss this with their customers to ensure it is understood. This avoids any awkwardness and potential damage to the working relationship as all parties are clear on where they stand from the beginning. With times still tough for businesses, especially in light of the FPB research showing the increasing costs companies are facing for fuel, transport and marketing among other things, it is important that businesses do all they can to keep cash-flow moving efficiently.
“Implementing effective payment terms and enforcing these across the board is a relatively easy place to start and will also highlight any customers which are causing particular issues – remember if they’re not paying you for your goods or services, they’re not a customer!”
Lovetts’ 10 Tips to Tackle Late Payment
- Make sure your customers know you want to get paid on time. Too many companies give wrong signals, by failing to check that their invoices have arrived safely and are on their customers’ ledgers. Keep the credit function properly resourced.
- Tell customers early on, as part of good relationships, that legal action will be taken against non-payers. It doesn’t need to get personal at this stage, just clear.
- Add up the costs of going legal early on i.e. interest, late payment compensation, indemnity costs under contract (make sure your T&Cs allow for this). Then tell the customer what that figure is. Explain your reluctance to escalate costs unnecessarily.