The late payment of invoices remains a massive problem for small businesses in the UK and the government should do more to encourage companies to sign up to and apply the prompt payment code, an initiative introduced by the UK Government in 2017, which encourages signatories to pay small businesses on time.
That is the view of Steve White, managing director of Thornbury Collections, a company that provides companies with cash flow solutions including Debt Recovery, who notes that a year on from the act coming into force.
Research this year by YouGov and Hitachi Capital Business Finance, showed that 63 percent of small businesses must deal with late payment and 46 percent said some invoices are paid more than a month late. It is estimated there could be £50 billion of cash locked up in late payments, which disproportionately hits smaller businesses with a turnover under £1 million.
White says that, while the prompt payment code is a step in the right direction, it is also unenforceable – making it of little use to small businesses experiencing real payment problems.
“The late payment of invoices a massive problem for small businesses,”
“Companies up and down the UK are really struggling with cash flow issues and recovering money from old invoices. There is something of a knock-on effect, of course, with companies unable to pay because they haven’t been paid and so on.”
He says Thornbury Collections has signed up to the prompt payments code, but he also stresses that it is not enforceable.
“It is a voluntary code, so it is something of toothless tiger,”
“But as this becomes a bigger and bigger problem in the UK, the government should revisit this issue.
The UK is quite bad at paying. Most businesses get paid a 30-day invoice up to 46 days. As long as you’re aware of that, it’s not so bad, but if you’re not, it can hit you hard.”
White notes that there are other options available to companies struggling with cashflow because of this issue. More companies are turning to invoice discounting and factoring as a means of coping while the rapid growth of Thornbury Collections also reflects the landscape small businesses face.
Formed in 2002, Thornbury Collection Services began life collecting clients’ unpaid invoices. Using the ethos of taking a neutral stance designed to help both parties reach an amicable agreement, the company has enjoyed rapid growth. It celebrated ten years in business in 2017 and acquired another debt collection agency in west Wales last year. Now, it offers a much wider range of services, helping clients in a number of ways.
“We recognise that debt recovery is probably the least enjoyed aspect of any business or company, mainly because most individuals have little knowledge or training in good collection practice,”
“We offer a ‘No Win, No Fee’ debt recovery service using our focused, flexible and specialised service. We also offer alternative debt solutions to assist clients with long-term cashflow management. We can provide you with an outsourced credit control function to enable businesses to refocus your attention to the main core of their business.”