Small firms under pressure from late-paying customers

Late Paying Customers

Two–thirds of small businesses are owed more by their customers than they owe to suppliers, according to the University of Nottingham Institute for Enterprise and Innovation (UNIEI).

Late Paying Customers

Research from UNIEI revealed that non–paying customers and tighter lending conditions imposed by the banks have created serious cashflow problems for small firms – and the situation is getting worse. The survey also found 77% of small businesses believed that the balance between business credit and debt worsened between July and September last year. Association of Chartered Certified Accountants (ACCA) SME policy adviser Manos Schizas said:

“Much of the trade credit issue has to do with a relatively small number of large customers who are late payers, and that is being exacerbated by the banks feeling nervous about their balance sheets. The danger is that small firms are particularly vulnerable at the moment. Businesses have to take action to protect cashflow if they are to survive the downturn.”

“Where possible, firms should try to renegotiate shorter payment credit terms with their reliable customers so that they ensure some money is coming in. They should credit check new customers, and make sure that payment terms and conditions are right for their business.”

“Firms also need to keep on top of their cashflow forecasts on a monthly, weekly or even daily basis, so they know exactly what is coming in and going out. Having this information readily to hand will make it easier to access lending too.” said Schizas

Read our information on how to deal with late payment of invoices.

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