The recent late payment crisis has caused no end of misery for SMEs.
Small and medium enterprises are often at the mercy of larger businesses when it comes to settling payments for goods or services rendered.
Research conducted earlier this year by Xero’s Small Business Index (SBI) showed that around 400,000 small firms were impacted by the poor payment practices of larger firms.
This trend has, sadly, continued, with more recent data from the SBI suggesting that the rise in energy bills and wages coupled with slower consumer spending power and late payments is causing SMEs to feel the pinch.
Reviewing your payment terms and conditions will help minimize the detrimental effects of late payments.
How will renewing my payment terms and conditions help my business’s cash flow?
Within the terms and conditions of a business, there should be a clause which outlines the payment terms and conditions.
Terms and conditions surrounding payments should outline when a bill or invoice for goods and services must be paid.
The need to renew your business’s terms and conditions surrounding payment, especially in light of growing economic uncertainty, is growing rapidly.
By doing so, you will be securing clear rules that your clients need to follow, irrespective of their business size.
Where you have greater concerns about late payments, it may be beneficial to draft dedicated payment agreements which outline, in detail, when and how you should be paid, plus any penalties or actions in the event of late payment.
Are there legally specified boundaries on payment terms?
If your business is providing goods or services to a public sector body, all payments should be made within 30 days of receiving and accepting the invoice.
If your business is dealing with a private sector client, payment terms are typically agreed upon in advance, by both the supplier and the customer. The payment date should be no longer than 60 days from the day the invoice is received.
What action can I take in the event of a late payment?
If a debt remains unpaid then you can take various actions, including:
If you have outstanding payments due from another business or customer and need advice on renewing your payment terms and conditions, contact us.