The annual Late Payment Survey, which is conducted by commercial debt collection agency Hilton-Baird Collection Services, measures the evolving impact which late payment has on businesses of all sizes, as well as the steps they are taking to safeguard themselves against it.
What is the impact of late payment?
The survey discovered that 87% of businesses were adversely affected by late payment during 2014, with 30% now classifying more than 10% of their debtor book as over 90 days old. While 30% have also had to increase borrowing as a direct consequence of late payment, nearly one in five (19%) had to delay payments to HM Revenue & Customs and one in ten turned away new business last year.
It additionally found that 31% of the time British businesses spend on credit control is consumed chasing overdue debt.
How are businesses tackling it?
It is encouraging to see that businesses are adopting a wide range of strategies in order to reduce the impact of late payment. While 72% use regular reminders to get their customers to pay, there were annual increases in the proportion of firms suspending work and services (59%), using the Small Claims Court and/or County Court Judgments (35%), charging statutory interest (23%) and using factoring (13%).
Yet, alarmingly, fewer than half credit check new customers (49%), with even less credit checking their existing customers on a regular basis (28%).
Meanwhile, 17% of businesses now outsource all or part of their credit control process, an option which is proving most popular amongst those turning over between £1 million and £3 million (26%).
Alex Hilton-Baird, Managing Director of Hilton-Baird Collection Services, said: “It is deeply worrying how much of a financial impact late payment is continuing to have on businesses. It has been well documented how late payment is disturbing cash flow, but the effects run much deeper. The average business now spends almost a third of its credit control resource chasing overdue debt just serves to illustrate how businesses are struggling to win the battle against late payment. It is difficult to stress enough how important it is for businesses to be using the right mix of credit management strategies in order to protect themselves from late payment as much as possible.”
To check that you’re doing all you can to protect your business against late payment, Hilton-Baird has written a free-to-download eBook, entitled The Essential Guide to Credit Control. Click here to get your copy and discover how Hilton-Baird could help to recover any of your problem debts.