December 15, 2016
Small businesses in the UK are owed billions of pounds in late payments, but research has shown that a third are reluctant to chase slow-paying customers because they are worried about upsetting them or feel embarrassed.
Four in five say they avoid chasing debtors because they find the process 'uncomfortable', while one in five are afraid of antagonising their customers. This is a dangerous trend, as more than a third say they write off thousands of pounds of bad debt every year, the report shows.
When your business isn’t paid on time you may have difficulty paying your suppliers which not only impacts on your reputation but could have a negative effect on your ability to obtain credit - not to mention the strain small businesses are put under when they can’t pay their employees at the end of the month.
It is clear many businesses are worried about chasing the debts they are owed. Some try to leave it as long as possible until they are at a point where they cannot work without overdue payments before contacting their customers. They are often worried about the competition and concerned the customer will look elsewhere.
Despite a widespread unwillingness to pursue late payers, most small businesses recognise that taking action would deliver results: 30 per cent said they believe they could recover more debt if they were more proactive and 13 per cent of those who have had bad debt believe they could recover more than 50 per cent if they chased harder.
The study also shows that SMEs are using a variety of tactics for chasing debtors, including telephone calls, emails and legal action. Some have even shown up at the debtor’s office or home to escort them to the bank. Only 15 per cent utilise late payment regulations to charge customers for late payment.
It can cost as little as £50 plus VAT to recover a business’s bad debts - in practice it can cost you nothing once you allow for the interest you can charge and compensation of between £40 and £100 per outstanding invoice.
You can find more about our fixed-costs debt recovery service here