On the back on the longest and deepest economic downturn in living memory, you might expect companies to have collected every penny of outstanding debt on their books, but that is not the case. Often business owners are reluctant to chase debts from larger customers for fear of losing future business. Others just can’t get the money from larger companies who simply refuse to pay on time and stretch payment terms. SMEs are now owed around £27 billion which, although lower than a year ago, is still an astoundingly large amount.
Small businesses in the UK are spending enormous sums of money as they attempt to recover overdue payments, and the financial effects of late payments are being felt throughout the SME market. Business owners are having to resort to relying on bank overdrafts or putting in their own money to balance the books as they wait to receive old debts. Late payments by debtors has a direct effect on creditors as companies are forced into paying their own suppliers late. This damages relations and is now causing problems as businesses try and grow faster than the suppliers credit limits will allow.
Companies can help to prevent large debts racking up by having robust credit control procedures in place, with systems that chase the debts immediately they are late, not 2 or 3 months late. The longer a debt is left the harder it is to get paid. Uncollected debt is now hampering companies ability to grow, and debt collection should be the first part of a company’s growth strategy.