News

July 27, 2012

Businesses under pressure as late payments continue to rise

New Equifax research suggests late payments could be putting pressure on the cash flow of businesses that pay on time.

According to its survey of members of the Institute of Credit Management (ICM), two in three businesses are now directly affected by late payments. It finds that nearly 50% of businesses have seen late payments rise this year, with 58% chasing payments quicker than they were 12-18 months ago.

The need for businesses to protect their cash flow could be putting pressure on businesses that pay on time, according to Equifax and the ICM. The survey showed that 40% of respondents chase payments before they are due.

"Clearly chasing for payments earlier is important to protect a business's cash flow, especially where a pattern of late payment emerges amongst a number of customers," said Mark Nuttall, director, Equifax Commercial & SME. "With the delaying of payment becoming increasingly the 'norm', credit management departments are chasing payments quicker. 

"Whilst this doesn't necessarily mean customers have to pay early, we're concerned that businesses are withdrawing or aren't offering the best credit terms to organisations that are good payers, potentially stifling trade and growth in the economy."

The survey also finds that 64% of respondents think the Government should take action to protect small businesses against the negative effects of late payments.

Mark Nuttall said: "Doing credit checks on new customers should be a 'given' in today's economy. But organisations also need to utilise monitoring tools to stay alert to changes on existing customers' financial status."

Philip King, chief executive of the ICM, added: "We are urging business owners to tackle the late payment culture head-on by improving best practice. This way, we can reduce the impact of bad debt and help businesses begin to thrive again, ending this damaging cycle of needlessly late payment."