According to the latest survey of credit professionals, two in three UK businesses are now directly affected by late payments. The research, conducted among members of the Institute of Credit Management (ICM) by business information provider, Equifax, reveals that nearly 50% of businesses have seen late payments rise this year, with 58% chasing payments quicker than they were 12 to 18 months ago.
While it’s understandable that businesses need to protect their cash flow, both organisations are concerned that the continued growth in late payments is actually putting pressure on businesses that pay on time.
“Clearly chasing for payments earlier is important to protect a business’s cash flow, particularly where a pattern of late payment emerges among a number of customers,” said Mark Nuttall, director, Equifax commercial and small and medium-sized enterprise (SME). “With the delaying of payment becoming increasingly the ‘norm’, credit management departments are chasing payments across the board quicker.
“Forty percent of respondents to our research said they chase invoices before they become due. And while this doesn’t necessarily mean customers have to pay early, we’re concerned that businesses are withdrawing or aren’t offering the best credit terms to organisations that are good payers, potentially stifling trade and growth in the economy.
“Doing credit checks on new customers should be a ‘given’ in today’s economy,” added Nuttall. “But organisations also need to use monitoring tools to stay alert to changes on existing customers’ financial status. In this way, they can set the right credit terms from the outset as well as applying collections resources and strategies specifically to those companies that are most likely to pay late, rather than applying a broad ‘chasing’ approach to all customers.”
The Equifax research of ICM members was conducted April 2012, and 189 members responded.
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