This was the conclusion of research recently carried out recently by Xero whilst also revealing that they have to wait an average of 14 days for payment following due date.
Our experience is that these figures are, if anything, underestimating the true scale of late payments especially within the SME sector. The research also revealed that more than half (52%) of business owners worry about unpaid invoices, and the problem is most acute in London, where firms spend about one and a half days a month chasing payments, followed by Wales, where 1.3 days a month are spent on this task.
The main reasons given for the late payment of invoices was that their customers themselves having to wait for payments (32%), as well as “lack of consistency on payment terms” (27%).
More than a third (37%) of respondents identified reduced productivity as a consequence of them having to wait for payment, as well as cash flow problems, losing money and other work building up because time was being spent chasing unpaid invoices.
Gary Turner, co-founder and UK managing director of Xero, says: “The UK has a dismal productivity rating compared to the rest of the G7 nations. Our recent research has proved that small businesses are continuing to waste time chasing payments, only adding to the problem with productivity we face in this country.”
To help small businesses avoid cash flow problems caused by late payment, Turner recommends invoicing promptly. “The sooner you invoice, the sooner you’ll receive payment. It’s vital to get your invoicing process right from the start so that it is efficient,” he comments.
Chasing debts is an important task for businesses of all sizes however with smaller firms there is often neither the resources available to keep on top of debt collection, or the cash flow available to weather the shortfalls over prolonged periods of time. There are many excellent solutions to this problem, not least having accurate and up to date financial information available. Using Xero, we are able to ensure that clients financial records are maintained on a timely basis and the clients can have up to date debtor details on the mobile phones. Many clients actually raise invoices through their phones whilst still with their customers who receive them by email and in some cases pay immediately electronically.
Also allied to Xero there are a number of excellent add-ons that further automate the debt collection process, saving time, reducing hassle, and improving cash flow in the process.
As a Xero Certified Business Partner we are ideally placed to help you with your cash flow and accounting requirements are are currently running a number of free briefings around the region on the benefits of Cloud Accounting and how to improve your cash flow. For details call us on 0845 177 5500 or use our on-line contact form.