What do SMEs fear about acting on late payments?
Acting on late payments has been found to be a huge problem for many UK SMEs, according to a recent report.
A fear of offending customers and their own reputation is a fear for 60% of small business owners, according to a survey of credit professionals within SMEs.
The research, which was commissioned by Lovetts, a commercial litigation firm, found that 58% of the 149 credit professionals questioned said that reputation and causing offence would prevent them from acting on late payments.
Lovetts estimates that 1 in 4 SMEs are currently being paid an average of 1-2 months late, with only 22% getting their bills paid within the terms of their contract.
Meanwhile, back in July, SME Insider published a report from Bacs Payment Schemes which revealed that many SMEs are spending an average of £10.8 billion a year in attempts to recover overdue payments.
But what many SMEs fail to recognise is that there are plenty of different services that can provide guidance and support, from banks and management companies to UK insolvency practitioners and accountancy firms.
Interestingly, 5% of those firms questioned said the reason they were put off by going after the money they are owed is because of the costs of late payment retrieval.
Surprisingly, 20% of credit professionals also said that they simply don’t have the time to follow up their suppliers, while 18% said the process takes a long time; leading to just one fifth of SMEs claiming late payment compensation.
Charles Wilson, Chairman of Lovetts, commented that the perception of claiming back compensation is “far removed” from the reality of actually doing so.
Many firms “live in fear” of upsetting their customers by claiming back what is actually theirs, he added.
Mr Wilson explained that a lot of this does indeed come down to the terms and conditions set up between the two parties; if it’s made clear right from the beginning that late payment compensation will be claimed if payments are overdue, then there are no surprises.