Freelancers and small businesses are getting an even rougher deal than usual, as figures from Experian show they are currently the only individuals and companies in the UK to be making strides on prompt payment.
All company sizes from three employees upwards took longer to pay in the first quarter of 2013 than in either the previous quarter, or the same quarter of the previous year.
The biggest firms – those with over 500 employees – took 33.9 days beyond agreed terms in Q1 2013, up from 33.5 in Q4 and 31.1 in Q1 2012.
This is a full ten days longer than their closest neighbours, those with 101-500 employees, who took 23.9 days beyond terms in Q1 2013.
At the other end of the scale, individuals and companies with up to two employees paid, on average, 27.9 days beyond agreed terms.
While this is longer than all companies with 3-500 employees, it is a substantial improvement over the Q4 figure of 32.9 days, or the Q1 2012 figure of 32.5 days beyond agreed terms.
This makes the UK’s smallest companies – and those who are self-employed – the only group to have improved their payment performance over the past year, or over the previous quarter.
“The marked improvement by the smallest firms is clearly encouraging,” says Experian’s UK managing director of business information services Max Firth.
“But the decline among other businesses is a concern; there is still caution among many firms when it comes to offering business lifelines such as trade credit and favourable payment terms.”
Protecting Prompt Payments
Regardless of the size of your business, its survival depends on maintaining consistent cash flow – and that not only means paying your bills on time to avoid penalty fees, but also enforcing your rights when your own customers fail to settle their bills on time.
When a payment becomes overdue, there are three charges you can usually add to the amount owing, helping to offset the cost and inconvenience of having to pursue for payment.
However, many small-business owners are uncertain of how and when to apply these – and many fear that, if they were to do so, it would delay payment even further.
Safe Collections’ Late Payment Calculator can handle the sums and offer reassurance, with links to detailed guidance about how to chase payments, and to enlist Safe Collections’ help in doing so.
Available for iOS, BlackBerry and now for Android as well, it’s an easy and reliable way to calculate how much you are legally allowed to charge your customers – which, thanks to several additional fees permitted under law, could actually be much more than the initial amount they owed.
The first of these extra charges is a three-tiered flat-fee system that has been in place in the UK for many years, and allows up to £100 to be added to the bill depending on the size of the original invoice.
Under the recently introduced EU Late Payments Directive, it is now permissible to reclaim the costs of taking debt collection action from the debtor – allowing you to add the remaining balance to the bill between your total reasonable costs, and the relevant three-tiered fee.
Finally, you can also add statutory interest to the amount, based on the Bank of England reference rate and the number of days overdue the invoice has become.
If you are in any doubt, install the Safe Collections Late Payment Calculator for an easy step-by-step calculation of the interest owing, and guidance on how to apply this extra cost to the invoice issued to your client.
For further advice on late payment issues, visit Bytestart’s dedicated cash flow section.
Tagged as:
late payment,
prompt payment