A recent survey by BACS Payment Scheme found that 44% of SMEs are currently experiencing issues with late payment, waiting on average 38 days for payment after the agreed terms. With the recovery from the recession widely reported to be hinging on the prosperity of UK SMEs, these issues must be resolved before we continue to see more downward pressure on everyone’s margins.
So how can businesses become proactive towards handling payment issues? Signing up to the Prompt Payment Code, which is a government scheme of commitment to timely payment and encouragement of best practice between organisations and their suppliers, would be a good place to start. However, more can be done by individual businesses to implement the aims of the payment code.
How can this be achieved? Provided below is some guidance that will help your business improve its own financial position and speed up cash flow:
- Commitment to the best payment practices outlined in the Prompt Payment Code will put pressure on large suppliers to change their buying behaviour and minimise the bargaining power they currently exert over SMEs.
- Consolidation of payment services through a single provider will speed up settlement times and reduce the hassle of managing multiple relationships and reconciliations.
- Selecting a merchant acquirer who prioritises prompt settlement of funds from card payments will enable your business to access those funds more quickly.
- Using an electronic invoicing service can be far more efficient than traditional paper invoicing for both you and your customers to make and receive payments. Invoices can be settled instantly online, allowing your business to get paid faster.
- Ensure that your business has the ability to accept payments through your customer’s preferred payment method. Electronic payments are fast becoming the norm, so it is important that you possess a variety of payment acceptance facilities.