Why more small businesses are taking action on unpaid invoices

Unpaid Invoices

New research from Hitachi Capital Business Finance found 40% of small business owners are taking legal action against customers over unpaid invoices. While this is an indictment of late payment practices, it's also an encouraging sign that SMEs are increasingly aware of their rights and willing to exert them.

A growing problem

Late payments have long been an issue for UK SMEs. There was a near 25% increase in unpaid debts in 2018 and, despite the Government's claims to have clamped down on the problem, 22% more businesses are spending time and money on legal action pertaining to unpaid invoices.  

The consequences of this aren't limited to those businesses directly affected, either. Late payments have a demonstrable ripple effect. Hitachi Capital reported a 14% increase in the number of SMEs unable to pay suppliers due to unpaid invoices, and one in five business owners report that they're unable to pay their own salaries.

Positive action

The positive side of the report is that more small businesses are realising that recovering unpaid invoices is their right. There are UK laws that exist specifically to help prevent unpaid invoices, recoup any debts that accumulate and even to help cover the costs. These include the right to:

• Charge interest. Once payments are over 30 days late from public bodies or 60 days from private businesses, you are allowed to start charging 'statutory interest' of 8% plus the Bank of England base rate for business to business transactions.
• Complain to the Small Business Commissioner (SBC). If your business has fewer than 50 employees, the office of the SBC may be able to assign a caseworker to assist you.
• Take your case to a County Court. If mediation fails, you can take your case to a County Court. You'll need to properly prepare for a hearing, but if the court rules in your favour the defendant will be forced to pay.
• Engage a third-party debt collector. A good certificated Enforcement Agent will be an experienced mediator with a solid knowledge of the law. This can be a crucial step on the path to recovering what you're owed.

If you need help handling unpaid invoices in a fast, effective and ethical way, contact Dukes Bailiffs today.