Wednesday, January 30, 2013
SMALL and medium-sized businesses in East Anglia are taking a tough line in dealing with firms which are slow in paying their bills.
According to research carried out by Barclays, late payment continues to be a critical problem for the region’s small and medium-sized enterprises (SMEs), with 92% of those questioned in a survey having suffered over the last two years, worse than the national average of 85%.
However, the study also shows that many SMEs in the region are taking action to protect themselves against the risk of firms owning them money going out of business, with nearly one in three (32%) having declined to do further business with customers with a record of late payment, well ahead of the national average of 22%.
Nearly two out of three (61% in the east, 60% nationally) have communicated more frequently with or chased the customer’s finance team, two in five (42% in the east, 32% nationally) have threatened to or taken out legal action, and around a third (36% in the east, 30% nationally) have requested payment up-front.
The research also reveals the impact that late payments can have on business owners, with a quarter of those surveyed in the region (25%), and nearly one in three nationally (30%), who have experienced late payments in the past two years having had to use personal money or assets to boost their cash flow.
One in six (16%) of respondents in the region (20% nationally) say have suffered extreme stress as a result, and one in 10 (9%, against 11% nationally) say late payments have nearly caused a business to fail.
Mark Suthern, head of relationship banking at Barclays Business Banking, Eastern, said: “Minimising late payments and effectively managing cash flow is crucial for the survival, as well as the growth of small businesses.
“With one in five businesses that cease trading citing bad debt as the reason, it is vital that SMEs tackle this problem and take action before it is too late.”
He added: “Faced with a continually challenging business environment, small businesses clearly have no other option than to take action against customers who repeatedly pay late.
“Whilst it goes against all natural business instincts to turn customers away, it is entirely understandable when weighed up against the overall impact of the late payment on the future of the business.
“Using a product like CreditFocus to check the credit worthiness of the business you are looking to trade with is also a great idea.”