In the long term, the ongoing pursuit of this can place undue pressure on internal teams, redirecting critical focus from strategic financial management and ultimately undermining operational efficiency and profitability.
Although late payments are a common challenge for many businesses, their impact on your organisation can severely affect long-term financial stability and limit future growth opportunities.
Don’t Wait to Act: Addressing Late Payments Early
While preventing late payments is always preferable to exhausting internal resources, we know from numerous clients that limited capacity can make this a real challenge for many businesses.
Addressing late payments promptly is not just good financial practice, it’s essential for safeguarding a business’s long-term health.
Recent research from Barclays reveals that three in five (58%) small and medium-sized enterprises across the UK are currently waiting on late payments from customers. This widespread issue highlights the growing need for businesses to take proactive steps in recovering outstanding debts before they start to erode financial stability and resilience.
Tackling Persistent Late Payers
How To Protect Your Business:
- Define Clear Credit Terms: Set explicit payment terms, including due dates, acceptable payment methods and penalties for late payments. Ensure these terms are communicated consistently with every customer.
- Establish Clear Credit Risk Assessment: Evaluate the financial stability of new customers before extending credit to mitigate risks upfront.
- Set Up an Escalation Process: When internal efforts reach their limits, partnering with a debt collection agency ensures timely escalation, including the potential for legal action, to recover outstanding payments effectively.
Ways To Set Up an Escalation Process:
- Once payment reminders are sent ahead of the due date, clearly outlining the final payment deadline, it’s crucial to follow processes that encourage prompt payment if the amount remains outstanding.
- Start by reminding customers of the benefits of keeping their accounts in good standing. Emphasise the value of the relationship between your business and the customer, making them aware of the negative consequences if payment is not made.
- If gentle reminders are not prompting payment, it’s time to take a firmer approach. Your communication should become progressively more serious as the invoice ages.
- If the situation does not improve, you may need to consider taking legal action. If your business does not have the resources to pursue this, involving a debt collection agency can help formalise the process and pursue litigation as a last resort.
How Involving a Debt Collection Agency Can Help Your Business
Word quickly spreads when businesses are seen to tolerate persistent late payers. Bringing in a debt collection agency can relieve the pressure of chasing multiple overdue debts, allowing internal teams to refocus on core responsibilities. A recent study reported by Begbies Traynor revealed a 13% increase in the number of companies facing ‘critical’ financial distress. Debt collection agencies not only bring expertise in recovering unpaid invoices, but also the resources and tools to do so efficiently and effectively.
A clear strategy for late payments protects your cash flow and maintains strong customer relationships.
To find out how we can help strengthen your escalation process, call us on 020 8080 2888 or find helpful resources under the Insights tab.
