Gloomy news from the Forum of Private Business in recent weeks, as FTSE 100 companies are again being urged to abolish the late payments culture by settling their invoices on time, and banks are again being urged to lend more to cash-strapped small businesses.

In an ongoing climate of tight availability of finance in all its forms, and with outstanding invoices totaling tens of billions of pounds, it can be easy to wonder what's the point in chasing payments?

But with bank lending harder to access, and the big firms as reluctant as ever to part with their cash, battling the late payments culture by any means necessary could give you not only healthier cashflow, but the financial means by which to capitalise on your competitive edge as the nation's various industry sectors begin to return to health.

Looking away from the banks

While the FPB says many entrepreneurs will feel "vindicated" by the spotlight currently shining on banks' lending practices, its recent research also found many small-business owners are simply looking to other forms of funding.

"Many entrepreneurs alienated by mainstream lenders are more than willing to vote with their feet and explore newer, more innovative financial services less dependent on automated risk criteria," says senior policy adviser Alex Jackman.

He adds that "reducing business costs and making inroads into tackling the huge problem of late payment would also improve the situation greatly".

But setting lending to one side for a moment, are there still ways in which businesses can increase their available capital, without having to borrow?

Playing FTSE

Only one in four FTSE 100 companies have signed up to the new Prompt Payment Code designed to ensure businesses settle their invoices on time, all of the time.

Despite this, FPB CEO Phil Orford says all big firms "could and should" sign up to the code, adding that they are "the true bastions of the UK's private sector".

But wait a minute, aren't these high-profile supporters of the PPC the very same organisations that have recently been accused of money laundering, rate fixing and failing to hit agreed SME lending targets?

So what really is the solution, if it doesn't rest with the banks?

Stand your ground

The point really is that, when you begin negotiating over prompt payments, you can often find yourself plunged into a haggling process where a big business customer will hold you to ransom, bartering you down on price while demanding invoicing periods of as long as 120 days - good for their coffers, but not great for small businesses' finances.

In these situations, it is important to stand firm and stay strong. Prompt payment is a right, not a privilege. You should not feel like you have to allow endless invoicing deadlines to your biggest customers - whose payments likely represent the largest portion of your income.

Be realistic about what it's worth agreeing to, and what will simply incur unacceptable costs on your part, and don't be afraid to chase a late payment - big businesses know the game, and they also know how to quit while they're ahead, so you could find you receive your money sooner than expected when the debt collection letters start to arrive.

Source The FPB articles one & two.

Image "Text Fist" by flickr user Andrew Mason is licensed under CC BY 2.0