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Entrepreneurs Panel

Jennie Johnson
Tony Caldeira
Steve Purdham
Brian Hay
Richard O'Sullivan
David Pollock
Debbie Pierce
Julie Meyer
Michael Oliver
Laura Tenison
Jeremy Roberts
Charlie Mullins

Late payments affecting your business?

Rich Preece, managing director of Intuit, gives his top tips for getting paid on time.

The demands of running a micro business are high; every day is a juggling act: bringing in sales, spending time with customers and balancing the books.

Ensuring you are delivering on your product or service is tough, but the stress can be made much worse when you’re worrying about getting paid for it.

Unfortunately, this is exactly what’s happening to small business owners across the UK.

We commissioned research to investigate the late payments problem and it showed that micro-businesses are collectively owed an enormous £16.9 billion in outstanding payments.

As a result, these firms are borrowing to survive.

The research also revealed how late payments are having a huge time impact on micro-business owners. Chasing outstanding payments and invoices and managing the administrative burden this causes is demanding 19 full working days each year – that’s almost one full working month each year.

Given micro-businesses (1-10 employees) account for 96 per cent of all businesses in the UK, their continued health is absolutely vital to a vibrant economy.

So what can micro-business owners do in order to avoid or at least reduce the impact that late payments may have on their business?

Here are my top tips to help alleviate the pressure:

1. Research what’s out there – The Government is increasingly investing in resources to help micro-businesses, so it’s worth learning more about what’s out there to help you. For example, Business Secretary, Sajid Javid, recently used the Queen’s Speech to announce the new Small Business Conciliation Service, which once introduced, will help settle disputes between small and large businesses, especially over late payment practices. Services like these, when deployed effectively, can go a long way to support micro and small businesses.

2. Bring your accounting online with e-invoicing – Our research found that only 36 per cent of micro-businesses issue e-invoices via email and many still issue traditional paper invoices – with some waiting up to a month after completion of work to do so. A move to electronic invoicing or even immediate card payments has the potential to significantly improve micro-businesses’ cash flow and save valuable time by making it easier for customers and suppliers to pay.

3. Put more pressure on your large enterprise customers –The blame for late payments frequently lies at the door of big business, whose rigid payment terms are often designed to protect their own cash flow. Consider issuing penalties or adding interest for outstanding payments. Not enough micro-business owners are doing this because they fear losing business from their large enterprise customers for doing so or just aren’t aware of this right.

4. Strict payments terms: 30 days – This is a standard time period for payment terms and if you have them in place, start chasing from day 31 to get paid as quickly as possible. The longer a job is completed without payment, the more difficult it will become to get paid.

5. Overhaul your finances – Having a complete overview of what’s coming in versus what’s going out will enable you to forecast better. You’ll have a clearer idea of when payments are due and can be prepared to chase at the right time. There are many different management tools available that give owners real-time access to their finances. Getting a complete overview of the health of your business at the touch of a button also enables you to make better-informed business decisions very quickly.

6. Create strong relationships with customers – The importance of building a good relationship extends beyond retaining the loyalty of your customers. It sounds obvious, but if you take the time and effort to get to know them personally – both your usual contacts and those in their finance teams - they’ll be less likely to cause complications when it comes to making payments.

7. Have a buffer in place for tough times – This could be a last resort, but can provide you with reassurance if something goes wrong and payment is delayed. Set money aside for when times could be tough and don’t touch it unless absolutely necessary.

Every business owner who's dealt with late payments and the real possibility of non-payment knows it can have a devastating impact.

The initiatives the Government has put in place will do a great deal to help, but businesses can get a firmer grip on their finances by using tech to combat late payments.

By doing so, they can have greater financial security and more of their time will be freed up to let them get on with their passion – starting, running and growing their business.

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