Whatever way you look at it, the data is damning. The UK is bottom of the charts when it comes to paying businesses on time. We have the world’s highest proportion of invoices paid late – and 9% of them are written off completely. Every year, companies spend an average of 15 working days chasing late payments: more than in any other country in the world. It’s unacceptable, and we have to address it.
We can start by reforming attitudes to recouping unpaid debt. I understand that charities, campaign groups and the media want to ensure there’s no intimidation in recouping losses. This is right. However, there needs to be balance and we need to hear more voices empowering organisations to fight for what’s rightfully theirs. They must never be made to feel guilty for seeking help to do so.
I firmly believe that business owners should be prepared to chase payment rather than give up easily on their hard-earned income. The alternative is ‘pricing in’ more and more invoice write-offs to products and services – and that sends a bad message. It implies that those who pay their bills on time ought to cover the cost of those who choose to pay late, or not at all.
When companies feel justified in chasing overdue money, there’s plenty they can do to improve the situation for themselves. The first thing is to be careful in vetting their new customers with basic credit checks and references. These should be followed with regular communication to ‘check in’, and systems that flag when debts are growing so they can act fast.
I’m always surprised how often 'terms and conditions' get passed over, too. Simply inserting a clause whereby the costs of collection and enforcement are added to the sum owed will help the creditor get support from debt collectors. But because of the atmosphere at the moment, even such a basic clause obviously only targeting serious non-payers can spark worry.
Part of the problem is also that a lot of publicity has centred on debtors' rights recently. However, the law is also clear in its protection of creditors. For example, if you don’t include a clause to charge debtors the cost of collection and enforcement, you can still turn to The Late Payment of Commercial Debts (Interest) Act 1998. This allows you to charge statutory interest of 8% plus the Bank of England base rate on late payments, making it more viable to instruct collectors.
Having the courage and conviction to make use of our basic rights is already a step forward. Only by doing so will we challenge the complacency that has grown up around commercial debt.
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