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UK SMEs urged to be smart about late payments.
Added: (Mon Sep 10 2007)
UK SMEs urged to be smart about late payments.
Bacs provides top tips for payment success.
To help UK SME’s avoid the scourge of late payments, Bacs Payment Schemes Limited (Bacs), the company behind Direct Debit and Bacs Direct Credit, has produced five top tips that every business owner should put into practice to improve financial management and control.
For most SME business owners, managing cashflow can be a bit like spinning plates. This balancing act can easily be hampered if invoices are paid late. And with more than two thirds of SMEs (59%) experiencing late payment problems at one time or another*, something needs to be done to tackle the problem head on.
Top tips from Bacs
Credit check clients and suppliers up front. If you knew a company had experienced financial problems in the past, would you still give them 30 days credit?
Once you have signed a contract with a trading partner, encourage them to pay all invoices straight into your bank account by Bacs Direct Credit. Include your bank sort code and account number on invoices along with the message “Pay Me Direct.” This small step can save time on payment reconciliation and queuing at the bank to pay in cheques.
If people are good at paying you, why not reward them? Offer discounts for prompt or early payers encouraging them to keep the money flowing in.
Practice what you preach! Save your own suppliers time and money by paying them using Bacs Direct Credit. It’s also worth settling your regular business bills by Direct Debit. This approach could help you negotiate better payment terms and avoid penalty charges on any overdue invoices or bills.
Get familiar with UK business law, especially if you have customers that frequently pay you late. In the UK, all business owners and managers are entitled to claim reasonable debt recovery costs and Statutory Interest under late payment legislation. For more information go to ww.payontime.co.uk/legislation/legislation_main.html
Commenting, Michael Chambers, managing director at Bacs said: “The first quarter of the 2007/08 financial year got off to an exceptionally busy start. As well as the usual round of financial tasks, there has also been a new wave of business legislation coming on stream that SME’s need to be aware of - for example increases in maternity entitlement plus changes brought about by the smoking ban. With so much for business owners to think about, we want to help them keep late payment issues at the top of the agenda.”
Continuing he said: “All companies need robust and reliable business processes in place to help run operations efficiently. When it comes to financial matters, this means being smart about lots of things, including how best to deal with late payers. Although the odd overdue bill may not seem important in the grand scheme of things, problems associated with late payments can easily spiral out of control. For some companies this can put them in real peril. Being switched on about late payments is imperative for small business owners and knowing how best to avoid the associated problems means risk can be significantly reduced.”
Dispensing Bacs’ late payment advice online is Sal Smart - a brand new animated character who runs her own flourishing IT business. Along with the rest of her family, The Smarts, Sal uses automated payments to save her time and money. As part of its latest campaign to promote automated payments, Bacs is giving business owners the chance to improve their bottom line by playing a new online game. £500 is up for grabs for the person who can keep a series of coins spinning simultaneously. To play, log on to: www.paymedirect.co.uk.
Bacs will reveal latest figures on the extent of the UK’s late payment problems in Q4 2007. In the meantime and for more information about automating payments go to: www.paymedirect.co.uk. This part of the Bacs website is dedicated to finding solutions to late payment issues by encouraging SMEs to utilise automated payments in place of traditional methods.
*Figures were obtained as part of a Market Research Programme conducted on behalf of Bacs in June 2006. Business Research specialists, Continental Research conducted 500 business interviews with managing directors, financial directors and senior managers of UK companies. Data has been weighted to be representative of 727,000 SME’s and of 1,095,000 small businesses and 147,000 mid/large corporates in the UK.
ENDS
About Bacs:
Selected as a 2007 Business Superbrand, Bacs is a not-for-profit, membership-based industry body, owned by 13 of the leading banks and building societies in the UK and Europe. For almost 40 years, Bacs has been at the heart of the payments industry. It is responsible for the schemes behind the clearing and settlement of automated payments in the UK and maintaining the integrity of payment related services.
Almost 5.5 billion payments a year are made through Bacs’ principle schemes, Direct Debit and Bacs Direct Credit, equating to approximately £3.4 trillion in 2006. In June 2007, the number of transactions processed in one day hit an all time high of more than 83 million.
For further information please visit www.bacs.co.uk or go to www.thesmartwaytopay.co.uk, the home of The Smarts, an animated family who use automated payments to help improve financial management and control.
More about Direct Debit:
A Direct Debit is an instruction from a customer to their bank or building society authorising an organisation to collect varying amounts from their account. This can be used to ensure regular, safe and efficient payments of anything from household bills to charitable donations. Over 2.8 billion Direct Debit payments are processed by Bacs a year and 75 per cent of adults now have at least one Direct Debit commitment. For further information on how to set up a Direct Debit to help keep accounts in order, please contact your bank or building society.
More about Bacs Direct Credit:
Bacs Direct Credit is mainly used for paying wages and salaries - in fact over 90 per cent of the UK workforce is paid via Bacs Direct Credit. In total, Bacs Direct Credit is used for paying four million wages every week and nearly 25 million salaries a month.