Small businesses are extremely vulnerable to cash flow problems, and even the slightest slip in payment dates can leave the business unable to pay its suppliers and even staff salaries. In many cases, big suppliers don’t pay their smaller suppliers quickly enough to keep the small businesses running, and as a result the small business finds it simply can’t make ends meet.

News that one of the oldest agricultural firms in Lancashire has entered administration has been met with shock and dismay. Riley Brothers International Haulage Ltd, the most recent iteration of a company with a history stretching back more than a century, entered administration on the 18th of December 2015 with the loss of more than 130 jobs.

When you sign up a new customer or client, it’s tempting to skip the formalities. New customers are always keen and it seems like nothing can go wrong. The last thing you want to do is sour the relationship, or risk losing a client to a competitor. If you ask for a deposit, are you at risk of scaring them away?

In truth, most businesses are used to paying deposits especially if they are dealing with freelancers or micro businesses, and there are plenty of good reasons that you should ask for one.

Most businesses have experienced the worry and inconvenience of a client that always pays late. Short of ditching the client (and we are perfectly comfortable with advocating that as a tactic), there’s no rapid solution to the problem. But you can improve your chances of getting paid if you subtly change your credit control processes.

In this article we will explore a few easy ways to help you manage those 'tricky' clients and the excuses they use to delay payment beyong agreed credit terms.

Although many small and medium-sized businesses know the importance of background credit checks on new customers, a lack of familiarity with the process of actually carrying out a credit check can lead many to overlook this crucial step in their risk management.

Safe Collections have teamed up with credit check specialists Experian to make it easy and affordable for freelancers and fledgling businesses to begin credit checking new customers.

Late payment is a constant problem for businesses in the UK and overseas. Credit terms are ignored and following up can be difficult for some companies, especially if you are a very small or micro business.

This is not how it should be. Every business, irrespective of size, should expect their customers to honour the agreed credit terms and pay in full and on time.

It doesn't seem like rocket science to suggest that if a customer goes bust, you might want to stop supplying them; in fact, if you're doing your credit control properly, you'll probably want to restrict their account long before they publicly declare insolvency.

Under new government plans, due to come into force this October, you might find you are banned from taking such action, once your customer's financial woes are made public knowledge.

The payment practices of the UK's biggest companies have been under scrutiny for a while now, with voluntary efforts such as the Prompt Payment Code attracting criticism for being 'toothless' in terms of enforcement action.

Meanwhile though, nobody really wants to see a situation where it is mandatory to take late payers to court, or to enforce penalties and interest - after all, sometimes you might simply want to extend the deadline as a gesture of good faith to a valued customer.

When it comes to avoiding bad debt the old adage "prevention is better than cure" is a very useful rule to follow. As we tell any business owner that will listen, it is absolutely imperative that before you extend a customer credit you answer the following questions:

  • Does this customer have the financial means to pay?
  • Are they prepared to pay promptly or at all?

The UK's small businesses are facing even longer overdue invoices than at the worst point of the recession, according to figures from ABFA.

In a report published earlier this month, the Asset Based Finance Association revealed that, in 2009 when the recession peaked, firms with turnover of less than £1 million per year were waiting on average 61 days for invoices to be paid.

Hitting the Headlines: Safe Collections in the Guardian

in About Safe Collections by Adam Home
If you're a Guardian reader, you may have seen Safe Collections' collections and partnerships manager Adam Home quoted in a Guardian Professional article on May 12th. Tim Aldred's piece looked at the case for credit control teams as a way for businesses to…

Hitting The Headlines: The Independent on Sunday

in About Safe Collections by Adam Home
In 2009 our founder and Managing Director was interviewed for a piece in The Independent On Sunday, this article is reproduced below with their kind permission. in 2009 we still went by our original name of Creditsafe Ltd, whilst our name may have changed our…