The Government published further material on late payments last week — and it is an issue that deserves far more attention from business owners.
Late payment does more than inconvenience a business.
It can mean:
- borrowing to fund customers who have not paid
• delaying investment
• putting additional pressure on the owner
• paying suppliers later
• turning profit on paper into a cashflow problem
The Government says it intends to legislate against poor payment practices and strengthen the powers of the Small Business Commissioner.
One proposal has been a maximum 60-day payment term, and support among smaller businesses is significant: 73% of micro businesses and 70% of small businesses responding supported the idea.
But legislation should not replace good credit control.
Every business should know:
How much are we owed?
How much is overdue?
Who is responsible for chasing it?
What are our average debtor days?
Sales are not cash until the customer actually pays.
How quickly do your customers normally pay you?
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