Are late payments holding back your business?
Many of our merchants come to GoCardless because they are sick of chasing late payments. We wondered: how big is this problem, really? Pretty big.
The average UK SME is owed £36,000, a sum that would put many out of business. They also have to wait a staggering 43 days before settlement, stumping growth whilst working capital is withheld by sneaky debtors.
Chasing customers is a hassle, it’s boring, and doesn’t help business owners develop a positive and long-lasting relationship with their clients. What’s more, it’s a big waste of time. 14 days per year: that’s 14 days that could be invested in growing their businesses.
We’ve run the numbers to find out how much people in different professions would lose. The average plumber would lose £2,100, a private investigator £4,000 and a senior accountant £5,800. It could be more.
Recent research by Experian showed that big businesses are the worst offenders: sole traders generally pay overdue invoices a good 11 days earlier than large firms with 500+ employees. As the FPB have highlighted recently, this is on top of the already long terms of up to 90 days that big businesses set.
So what can you do to ensure you get paid on time? We’ve got three simple tips:
- Agree clear payment terms before you commence work. Aim for 30 days, especially when working with larger businesses.
- Use e-invoicing whenever possible. Check out the top UK online bookkeeping and e-invoicing providers here.
- Set up a Direct Debit when you commence a project, putting you in full control of your cash flow. Login here to instantly set up a Direct Debit through GoCardless.
Have any other ideas for improving your cash flow? Tweet @GoCardless.