Accountants find late payments getting worse not better.
7th August 2019.
Accountancy Body Institute of Chartered Accountants in England and Wales (ICAEW) which represents 150,000 members, has found the late payments culture is getting worse not better.
Tackle growing late payment crisis, ICAEW tells Johnson
They have urged the new prime minister Boris Johnson to help businesses by meeting the challenge of late payments. Although they may find he has another issue taking most of his time.
One in five businesses report late payments from customers as presenting a greater challenge than they did a year ago and late payments represent one of the main challenges flagged up by ICAEW members, according to the latest Business Confidence Monitor (BCM).
Late payments a challenge for 24% of SMEs
While the late payment culture was a major problem, increased regulatory requirements and falling customer demand were also cited as growing problems for the surveyed businesses.
The Business Confidence Monitor also found that confidence is negative across every sector, but especially in retail and wholesale, property, and transport and storage.
The accountancy body predicts GDP growth will be anemic in the second and third quarters of 2019, at 0.1% in Q2 and 0.2% in Q3.
The latest ICAEW Business Confidence Monitor (BCM) saw one in five businesses flag late payments as a challenge, rising to 24% for SMEs, representing an increase from last year.
What they say
Michael Izza, ICAEW chief executive, said, “The prime minister has promised Brexit by 31 October and the overriding priority of his government must be to get a good deal. However, this feedback from our members, who advise businesses in every sector and level of the economy, reminds us that they face other challenges as well, many of which have little to do with Brexit – such as late payments and the regulatory burden.”
Izza went on to say “Robust government action on these issues could make a real difference to the business environment, especially for SMEs, and would help to restore confidence and momentum. That would go some way to unlocking the economy and ensuring it is in the best shape to face the challenges and opportunities of life outside the European Union,”.
Tim Gardiner, Finance Director at Panton McLeod Limited said: “The most obvious case of abusive slow payers is still large corporates, particularly in the construction industry. A large part of the problem is where companies have complicated processes for the submission of invoices or claims for payment, combined with a lack of clarity as to who is the contracting company in relation to large scale projects. This arises from intermediaries acting on behalf of utility companies in my experience.”
Brexit not the only issue for businesses
According to statistics released in May by the federation of small businesses (FSB), 50,000 small firms go out of business because of late paying clients, and it is a clear problem that needs addressing.
Around two fifths of businesses also reported regulatory requirements and customer demand as increasing challenges.
Following the report, the ICAEW has urged No.10 to remember that businesses are facing problems other than just those presented by Brexit.
Michael Izza, ICAEW chief executive, said: “The Prime Minister has promised Brexit by 31 October and the overriding priority of his government must be to get a good deal. More than anything else that will give business the stability it is crying out for. However, this feedback from our members, who advise businesses in every sector and level of the economy, reminds us that they face other challenges as well, many of which have little to do with Brexit – such as late payments and the regulatory burden. Robust Government action on these issues could make a real difference to the business environment, especially for SMEs, and would help to restore confidence and momentum. That would go some way to unlocking the economy and ensuring it is in the best shape to face the challenges and opportunities of life outside the European Union.”
SMEs fear upsetting clients
Just last month, we reported that 75% of SMEs would rather not chase late payments out of fear of damaging their relationship with their clients.
A further 76% said they were more worried that their invoices would not be paid at all if they took a tougher stance against late payments from their clients.
Small Business Commissioner, Paul Uppal,said: “The key findings in this survey highlight that small businesses tolerate late and non-payment due to a fear of reprisal. The government is building an environment in which small and medium-sized businesses can continue to prosper.”
Why does late payment persist?
Earlier in the year, Bottomline, a software company that specialises in business payment solutions did a study that found 92% of businesses they spoke to admitted to paying suppliers late.
The figure and willingness to admit doing so shows the lack of accountability when it comes to late payments.
Speaking on the figures, Dr Louise Beaumont, an independent chair, advisor, investor and expert on the subject of late payments gave insight into why businesses are paying late, saying: “It varies. Sometimes they’ll say the quality wasn’t quite what we expected so they withheld payment, or that they found a typo on the invoice, so they kicked it back to buy themselves a little bit more time.
“Sometimes they say their payments processes are terrible, so their own processes get in the way of them paying on time. And some say they withhold pay to protect their cash flow and prioritize other payments.”
Dr Beaumont said that business pay late “Without understanding the vulnerability they are baking into their own business by doing that. Because if you rely on suppliers, and most companies do, putting them [suppliers] in a position of absolute vulnerability is an act of self-harm.”
Business confidence still negative
Another key finding from the ICAWE’s BCM was that business confidence is still negative this quarter, at -10.3, although this is higher than it was in Q2 2019, where it was at -16.6.
However, whereas in Q2 confidence was trending upwards, within Q3 it has trended downwards, impacted by both national and global events.
British Steel’s insolvency and the announcement of the closure of Ford’s Bridgend plant, as well as evidence of a global slowdown and international political anxieties, particularly with regard to Iran were all cited as reasons for the downturn in business confidence.
This trend has reversed gains that were seen after Article 50 was extended in April, and confidence levels are almost as low as they were following the EU referendum in 2016.
Business confidence was found to be negative in every sector, but particularly in Retail & Wholesale, Property, and Transport & Storage.
Confidence among SMEs is not as negative at with FTSE 350 companies and foreign-quoted companies, due to larger and international companies more exposed to global factors such as trade wars and protectionism.
Preparations for a ‘no-deal’ Brexit on 31st March caused a boost In Q1 as businesses increased their stocks, but any growth in the rest of 2019 looks likely to be limited.
There is potential for an improvement in consumer and business confidence following recent announcements of increased government spending and possible tax cuts. However, there is no plan for these to be implemented immediately.
Meanwhile, the new Brexit deadline of 31st October is looming creating the possibility of a ‘no deal’ or a general election, or both, and uncertainty is set to continue for some time.
Do you sell on credit?
With pressures on the cash flow it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.
Those customers will look for the easiest option to boost their cash-flow. Don’t let it be you.
You can’t just assume your customers can and will pay you eventually, no matter how big their name is.
It is essential to have credit management systems in place to monitor and check your customers credit worthiness.
It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.
About CPA
The Credit Protection Association can help!
Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply on credit, help us help you identify the risks.
Why use a third party collector?
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Over the years we have collected billions in overdue invoices for our customers.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
CPA is passionate about late payment
The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.
We are extremely passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.
If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.
As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.
Under little used legislation, you are entitled to compensation for those late payments.
Now you can boost your own cash-flow.
CPA can help unearth the those hidden treasures.
We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.
Yes, CPA can help you boost your business cash-flow.
Don’t let your bankers control you, contact CPA today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you realise you could be sitting on a fortune?
Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.
If you sold B2B on credit then there may be a hidden source of capital you can call on.
If you fancy an bit of extra cash in your business, rather than jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.
Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.
We can help you uncover the pile of gold, you didn’t even know you were sitting on.
If you trade with other businesses and were often paid late then you could be entitled to significant compensation.
Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.
Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.
You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.
That compensation could provide the cash boost your business needed.
But don’t delay, that compensation evaporates if not claimed within six years of the late payment.
How can CPA help?
CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.
We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.
Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.
CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.
The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit. You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.
We do the work, you receive the cash.
If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.
We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.
We are helping business owners who are looking to boost the returns from their business before they retire. We are helping businesses who have lost major clients after years of loyal service to get properly compensated for systematic late payment. We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.
Those former clients who regularly paid you late can finally be made to pay.
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections