Relieving the headache of late payment
March 18, 2011 (PRLEAP.COM) Business NewsDealing with the issue of late payment is a burden for any business regardless of its size. Taking valuable time out of the working day to chase up invoices undeniably adds pressure on business owners who would benefit more by investing their efforts in growing their business and seizing new opportunities.
Despite the fact that payment performance improved marginally among UK firms in Q3 this year, with businesses paying their bills an average of 22.61 days late, compared to 23.17 days during the third quarter of 2009*, late payment is still one of the main catalysts for a disrupted cash flow, which as we know, is the lifeblood of any business.
A bottleneck in funds, caused by outstanding customer invoices, can result in halting the purchasing cycle and, ultimately, can disrupt the supply chain, not to mention the negative impact on the goodwill and trust of customers and suppliers.
However, according to Andrew Bullard, head of business at invoice finance broker Cashflow UK, late payment can be avoided by putting some simple processes in place: "Every financial adviser is well aware that the single most important thing their clients can do to ensure the smooth running of their company, is to ensure that cash flow is managed properly. The biggest cause of small business failure in the UK is poor cash flow management, most often brought on by late payment issues.
"But while getting paid is an issue that plagues thousands of businesses, it doesn't have to spell the end for UK firms. As we all know, prevention is better than cure and financial intermediaries can ease the burden of late payment and faltering cash flow by encouraging clients to take simple steps to avoid reaching this dilemma.
"The most obvious advice intermediaries can give their clients is to urge them to agree on payment terms at the beginning of a relationship with a new customer and to maintain regular communication with them to ensure there is no movement from the commitment to pay so that each party knows where they stand.
"However, whilst these are viable ways to tackle late payment, increasing numbers of business owners, with the help of financial advisers, are recognising the benefits of invoice finance as a flexible solution to ensuring a healthy flow of cash into their business. Invoice finance enables firms to unlock the funds tied up in outstanding customer invoices as soon as they are issued, leading to an immediate and ongoing cash injection into the business, making financial planning more predictable. On receipt of an invoice from a client, the invoice financier will release a percentage of an invoice's value within 24 hours, bridging the gap between raising an invoice and getting paid, thus eradicating the risk of a bottleneck.
"In addition to this, the invoice financier can also provide credit control and collection services on behalf of its client, sending out statements and chasing the debt until it is paid, saving businesses valuable management time – which as we all know - is of the essence."
Cashflow UK is the country's leading finance brokerage specialising in factoring and invoice discounting and its specialist team of financial experts is able to offer impartial advice and find best provider.