How the economic uncertainty is affecting 

29th October 2019.

James Salmon, Operations Director.

A new study has come out on the effect the economic uncertainty we are currently experiencing is affecting the payment practices of UK businesses.

According to the latest study from trade credit insurer Atradius, sales on credit are increasing as UK businesses do all they can to attract potential customers despite the prevailing economic challenges.

The study showed:-

  • A 45% jump in sales on credit.  56% of B2B sales by value are done on credit, up from 39% just last year.
  • Suppliers are imposing stricter payment terms. Average payments requested within 20 days
  • 35% of invoices by value remain overdue on the due date
  • Average payments arrive 44 days after the invoice, down from 54 in 2018.
  • 74% of businesses experience significant impacts from late payments.
  • 53% expect an increase in late payments
  • Bad debt write-offs rise to 2.5% of all invoices by value. Up from 1.5% in 2018.
  • 45% of businesses delay payment to their own suppliers when they are affected by late payment

The advice: Seek help with credit management in this climate of economic uncertainty and rising insolvencies.

The Western Europe Payment Practices Barometer research report by Atradius found offering credit was being used by UK firms as a tool to increase and retain sales and to provide customers with short-term financing during a period of liquidity restraints.

More than half (56%) of the total value of B2B sales was done on credit this year, up from 39% last year which is an increase of 45%.

The report also showed that UK businesses focus on managing receivables through a balanced mix of credit management techniques.

The big increase in the use of trade credit is primarily a reflection of the current economic climate with a forecast rise in insolvencies of 10% this year and a further 5% rise in 2020, assuming an “orderly” Brexit.

When it comes to asking to be paid, UK businesses are tightening the line of credit they extend, setting payment terms at an average of just 20 days from invoicing, down from 24 days last year and significantly lower than the Western European average of 34 days.

Late payments and potential non-payments continue to be a major concern to UK businesses.

More than a third (35%) of the total value of B2B invoices over the past year remained outstanding at the due date.

More positively, there was a small increase in the percentage of invoices paid on time; 61% compared to 54% last year.

Indeed, UK business are overall getting paid quicker than they did a year ago, with payments arriving on average within 44 days from invoicing compared to 54 days in 2018.

According to the report, the proportion of write-offs has almost doubled with 2.5% of invoices classified as bad debt, up from 1.5% year on year.

For UK large enterprises, this figure rises to 3.5% of the total value of invoices written off as uncollectable, up from 1.9% last year.

That more business is done on credit but payment terms are reducing,  indicates that UK Businesses are more aware the credit risk in the current challenging trade environment.

Despite their sharp focus on receivables management, UK businesses are much more likely to feel the impact from late payments than their counterparts across Western Europe.

74% of businesses experience significant impacts from late payments. with only  one quarter (26%) of UK businesses reporting no significant impact on business arising from late payments from customers. This compares to a 58% –  42% split across Western Europe.

UK Businesses were also more likely to need to delay payments to their own suppliers due to late payments. 45% of UK businesses saying this was the case in order to make up for liquidity constraints arising from untimely settlement of invoices. By comparison, the Western European average is just 26%.

Looking forward, UK businesses are more pessimistic than their Western European peers about future payment trends.

A third (32%) expect customers’ payment practices to worsen over the coming months.

More than half (53%) expect a significant increase in late payments, particularly in long-term outstanding invoices.

This can adversely affect days sales outstanding (DSO) and result in an increase in write-offs of uncollectable receivables.

To protect themselves from bad payers, 42% of UK businesses will consider offering discounts for early invoice settlement.

A third (36%) are planning on increasing their credit control actions such as sending payment reminders on a more regular basis.

More than a third (38%) say they anticipate potentially tighter financing conditions which could cause them to reduce the workforce through lay-offs or hire freezes.

Alun Sweeney- UK & Ireland Regional Director, of Atradius said: “The Payment Practices Barometer points to a business environment continuing to face many challenges, most notably an expected increase in insolvencies over the coming months, which is forecast to be significant and adversely impact business investments.

“Looking ahead, the terms of future relations between the UK and the EU remain uncertain and UK suppliers anticipate a further deterioration of the risk climate. It is not sufficient to approach trade credit with prudence, it is critical to manage trade credit strategically to grow business safely and most importantly in a profitable manner. By managing cash flow successfully, businesses

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

Read our blog here on how to crack down on the late payment culture.

Read our blog here on how to give late payers the slap they need.

The “Why” of the late payment culture.

New PM should walk the walk and back small firms over late payments

Paying late is “crack cocaine” to big business.

Late payment culture risks “spiraling out of control”

visit our late payment compensation page

See our full blog and FAQ on late payment compensation

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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