Late Payment and Small Companies
With over three quarters of companies having to wait a month or more beyond their agreed terms, late payments are taking a big bite out of small business.
Every experienced RIFT explorer knows the importance of keeping the cash pumping through their business. If that vital circulation gets blocked or springs a leak, things can get ugly in a hurry. Worse still, since so many businesses rely on each other to survive out in the wilderness, a delay in that payment you’re banking on this month could be hurting more than just yourself.
Good planning and preparation will help a lot here, but sometimes the hold-ups are unavoidable – or even deliberate! In some cases, a larger company with a lot of influence might see delaying a payment to a smaller firm as just good sense for their own cash flow. It’s like taking a free loan from you without asking or agreeing terms, and it’s a huge problem if you’re dependent on the big company’s business.
While they don’t seem keen on getting their hands too dirty on this, the government is definitely making steps in the right direction to stop small businesses getting bullied by their biggest customers. They’re toughening up the Prompt Payment Code and encouraging firms to sign up to it, and working hard to change the landscape that led to the mess so many businesses are now in. The problem is, late payments aren’t going to be killed off by voluntary codes of conduct and name-and-shame tactics alone. At some point, every RIFT adventurer is going to want to stand up and fight for their business – and there’s a lot we can do together. Here are some examples:
- Keep track of your invoices: Your Clear Books account is your most powerful weapon and most versatile tool. Use it!
- Make them want to pay on time: Encourage faster payment with discounts or other incentives.
- Get creative: Sometimes it’s nobody’s fault. Look into invoice financing to get around that cash flow blockage and keep the money flowing.
That list is your carrot, now let’s take a look at the stick.
- Know who you’re dealing with: Look a little closer at your customers before you get to rely on them too heavily.
- The burned hand teaches best: Don’t be shy of charging interest on late payments.
- The last resort: Debt recovery firms are often considered a drastic option, but sometimes all it takes is a single phone call to solve the problem.
Late payments are never good news, and are a leading cause of premature death for small companies. Talk to RIFT Accounting and we’ll make sure that bad luck and bullying never put you out of business.
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