Businesses reveal significant late payment wounds
– 30% had to increase borrowing as a result of late payment
– One in ten forced to turn away new business
– Businesses experiencing longest delay in payment since survey began
British businesses have revealed the far-reaching financial impact of late payment in new research conducted by commercial debt collection agency, Hilton-Baird Collection Services.
With almost a third of the time (31%) British businesses spend on credit control being consumed chasing overdue debt, 30% now classify more than 10% of their debtor book as over 90 days old.
The annual Late Payment Survey, which polled business owners and finance directors on their experiences with getting paid during the past 12 months, found that almost a third (30%) have had to increase borrowing as a direct consequence of late payment, which includes the use of credit cards. Nearly one in five (19%) had to delay payments to HM Revenue & Customs, while one in ten were forced to turn away new business.
The survey additionally discovered that the situation is worsening, with the average invoice now being paid 22.5 days beyond agreed credit terms. This signifies the longest delay since the survey began in 2011.
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.
“That 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. The credit control process needs to start even before the order is placed, with robust account opening procedures and terms and conditions of sale, but not enough businesses have the resource to get the basics right, let alone manage the entire process. The older a debt becomes, the trickier it is to recover so even more time and resource has to be invested in securing payment, further increasing the burden.”
Encouragingly, 17% of businesses now outsource all or part of their credit control function. In the last 12 months alone, 9% took this step, which marks an annual increase of 3%.
62% of businesses spend fewer than 10 hours a week on credit control activities.
Alex Hilton-Baird, said: “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.
“Although it is good to see how much attention this issue is receiving, there is much debate regarding whether the government can, or even should, find the solution. In the meantime, the power to reduce its impact rests with businesses themselves and the actions they take.”
