Wbg welcomes Payment and Cash Flow review and highlights how SMEs can combat late payment

Following the announcement of UK Business Secretary Grant Shapps’ comprehensive review into tackling late payments for small businesses, Wbg, Accountants and Business Advisers agrees that late payments are an issue in the SME sector and has highlighted ways in which SMEs can help to combat the issue.

With over £23.4 billion currently owed in outstanding invoices to UK businesses, the Payment and Cash Flow review will scrutinise existing payment practices and the measures in place to make sure small firms are not ripped off by their larger clients.

It will include an in-depth examination of current payment reporting regulations and the Prompt Payment Code.

Catherine Livingstone, Partner of the Business Advisory Services team at Wbg, says that, given the economic challenges of recent years, cashflow is likely to be an issue for SMEs, making establishing robust processes and procedures for managing credit essential.

According to Ms Livingstone, the three critical areas whereby SMEs can manage late payment to the best of their abilities are: timing; systems and credit control.

“SMEs should seek to ensure that they process their invoicing as promptly as possible, as it can make a real difference to cashflow if they miss the cut-off date for a client’s payment runs,” she said.

“And they should ensure that they are operating as efficiently as possible, particularly with regard to automation through their accounting system, ensure they have accurate and up-to-date contact information in their system and, where possible, use cloud accounting software, such as Xero, which has built-in automated features to distribute chaser emails if payment terms are not met.

“And while there is often a reluctance among some owner/managers to chase up key customers for an unpaid debt, evidence shows that implementing credit control procedures will mean prompter payments which may be essential to safeguard cashflow and avoid the prospect of mounting late payment debts.

“The quicker and more likely owner/mangers are to chase up a debt, the quicker they will receive payment.”

Ms Livingstone advises any SMEs with cashflow issues to consult their accountant for advice.

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