Resolving the issue of late payments – a must-read guide for SMEs

The issue of late payments and other unresolved commercial disputes is rarely out of the news at the moment.  And for good reason.

Accounting software provider Xero estimates that SMEs have £131 billion tied up in late payments, while Pay.UK revealed that SMEs spend £4.4 billion each year collecting the money they are owed. Our latest survey paints a similar picture: we found that 96% of SMEs have experienced a bad debt in the past 12 months, with 60% percent stating that the late payments they experience are a serious issue for them; 42% believe that late payments put their business’ future at risk.

So the problem is well documented. 

But what about the solutions? How can we start to drastically bring these figures down? 

At Escalate, our focus is all about resolving late payments, bad debts and commercial disputes. That’s why we’re helping SMEs to recover £100 million which would have previously been written off. So here is our advice on what to do if you face a late payment or bad debt:

Do your research

Get to know your client and invest some time in due diligence, whether that involves asking for references, undertaking a credit check or reviewing the client’s accounts.

Make your late payment terms clear 

Agree expectations from the start. Many disputes arise from the fact that the parties involved did not take time to discuss their expectations at the start of the process. Clearly state your payment terms and other important points up front and avoid leaving any room for doubt later on. 

Document as much as possible 

Having a paper trail of important decisions can act as a reminder of the agreements made, providing evidence to bring both sides back on track. Comprehensive paperwork is also likely to help in a court case.

Address payment issues early 

The old adage that ‘a stitch in time saves nine’ applies here. A potentially tricky conversation early on can prevent a problem from growing in a complex legal case that will cost everyone time and money.

Understand the background 

Talk to the client to better understand the reasons for the issue. Building a relationship with the client may also provide them with an added incentive to prioritise your concerns.

Be firm but fair 

Your business is important to you, so nobody expects you to give in at the first sign of a disagreement. But don’t let your emotions cloud your judgements. Don’t make things personal. Step back and use an impartial observer, if needed.

Get an expert involved 

If you feel that the other party is unlikely to change its mind, it may be time for expert advice. This is exactly why we created Escalate. If you have already suffered financial losses, don’t automatically assume the costs of recovery outweigh the benefits.

If your business is struggling with bad debts, late payments or another type of commercial dispute, remember that there are solutions and writing-off should no longer be necessary. Please get in touch…