Late payments continue to plague small businesses amid inflation
In July, inflation in the UK reached a double-digit peak for the first time in 40 years, at 10.1% from the same period a year ago. This is attributed to rising food and energy costs over the past year, in which wholesale energy prices zoomed upwards in response to returning demand from fading pandemic restrictions. Natural gas prices increased by 96% and electricity prices rose by 54% amidst an ongoing global heat wave. Meanwhile, food costs rose by 12.3% in July from a year ago — the fastest monthly increase in British food prices in 21 years.
Simultaneously, the UK is experiencing a late payment crisis, threatening more than 440,000 small firms to be forced out of business, during this critical period of inflation. In the UK, small firms provide employment for more than 13 million workers. Retail, accommodation, and food industries struggle the most and expect business performance to worsen this year. Along with business shutdowns prompted by rising energy costs, this has sparked discussions about the lack of regulations and a payment culture that protects small businesses from getting paid on time.
How small businesses are working to solve this issue
Among numerous solutions being proposed and tested, a popular answer comes in the form of investments in digital and smart payment solutions. A novel mode of payment made popular and necessary by the Covid-19 pandemic, smart payment solutions speed up transactions between businesses and their vendors as well as customers. For many business owners, this solution can be a means to encourage clients by providing them with a more convenient way of making payments.
Card payment services for small businesses have expanded in terms of offerings by providing plenty of flexibility. SMEs can now choose how they want to take payments, their preferred equipment, and a pricing structure that works for them. This further benefits customers in giving them the choice on how to pay, by accepting all major card brands and online, mobile, phone, or email payments. Aside from providing flexibility and convenience, card payment services also offer added security and reliability, while minimising false-positive card declines and transaction costs.
When the pandemic struck, people also relied on contactless modes of payment for hygiene and convenience purposes. This resulted in a significant increase in spending using contactless debit cards, from 65% to 87% in the last three years. Today, contactless and smart card payments remain the preferred payment method, and for good reason.
Aside from smart card payment services, other measures small business owners can take to prevent late payments include offering alternative payment terms, such as milestone payments or instalments as opposed to full amounts. With digital technology, businesses can arrange for these smaller payments to be set up to avoid delays, and even automatically flag missed payments so that these issues can be resolved promptly.
In addition to novel technologies, businesses can further benefit from adjusting to a holistic approach towards client interactions. Establishing a positive relationship based on trust and loyalty, for example, can help ease future communications on potential late payments or changes. Essentially, investing in quality customer service can be an effective way to futureproof late payments from taking place. Balancing digital tech and an ability to approach clients professionally and politely with regards to late payments will help small businesses navigate these periods of inflation, while continuing to provide excellent products and services.