Vince Cable has expressed his concern at the potential impact late payments could be having on SMEs, amid reports he could be set to introduce a levy on companies that miss deadlines.
A spokesman for the Business Secretary said it was unfair that smaller companies were “struggling” due to clients not settling bills on time, and Mr Cable was “looking at what can be done by the Government to help”.
If the move goes ahead, it is expected to be modelled on an existing Swedish legislation that penalises companies that miss payment deadlines.
Challenges facing small businesses
Small businesses already have one legislative avenue they can pursue if they suffer from regular unpaid invoices. The Late Payments of Commercial Debts (Interest) Act 1998 allowing them to claim interest on any missed payments.
While this is well-intended, many SME owners feel that doing so would irreversibly harm their relationship with clients, and that the subsequent loss of business would have a more detrimental long term effect.
However, with regular late payments in some cases posing a threat to the financial future of smaller organisations, there is a delicate balancing act to be performed in order to maintain client relations and keep accounts in check.
How to address late payments
It is clear that your credit controllers have a vital role within your business, particularly when a client fails to meet a payment deadline.
The approach here should be a combination of determination and tact. It is a fact that the account must be settled to avoid detriment to your business, but equally it is advantageous to maintain a cordial relationship with the client.
It could be that a genuine oversight has been made and that a simple phone call will suffice. If you would like to be on the record while still remaining friendly, you can send a late payment notification letter.
While it is positive to see the government taking notice, in these situations it is often best to do everything you can to let good business practice settle the matter.
Adding to your credit control team
If you are looking to recruit credit control staff, Portfolio’s years of experience in the sector will help ensure you get the right person for the job. Contact us today to find out more about how we could assist you.