Under the new Enterprise Bill introduced by The Government in the Queen’s Speech, a new small business commissioner is to be appointed to tackle late payments in respect of goods and services. The role of the small business commissioner is to:
– Be a first point of contact for small businesses, providing advice and support on how to avoid disputes and how to resolve them
– Offer access to mediation services that quickly resolve issues, “at a fraction of the cost of going to court”
– Investigate complaints over unfair business practices and regularly document its findings
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From experience small companies are usually very good at paying their debts and it is very often the large companies which squeeze the smaller companies by paying late. This is something which has been going on a long time. Back in the 1990s a very well know PLC in the UK took on average 5 months to pay their debts even though they would have signed up to shorter payment terms. Small companies do not have the resources of larger companies, so this can lead to small companies going under.
So will the appointment of the small business commissioner help with the recovery of debts? To be honest, only time will tell. In the meantime there are procedures you can set in place which will help to ensure you are paid in a timely manner:
– Agree your terms and conditions of sale before you start to do the work.
– Ensure you have been set up as a supplier on the purchases system of the customer. If this is not done at the start, this will delay any payments.
– Where the customer issues purchase orders obtain a valid purchase order for the work to be done
– Invoice promptly and accurately showing all valid purchase order numbers provided and providing invoices in the format requested by the purchaser (if required). Payments will be delayed by not having a purchase order number on your invoice, as large accounting systems match incoming invoices to valid open purchase orders and will reject invoices which do not show purchase order numbers and this means the customer have to spend time validating the invoice.
– Offer ‘pay now’ options so you can receive your cash more quickly either by offering payment discounts or taking credit card payments. This will involve a small charge but you may be able to receive the cash more quickly.
– Send statements at the end of each month and chase unpaid invoices. You will find credit control letters on the internet and if you threaten to suspend a customer’s order or if you can cut them off from the service you provide, after chasing for what they owe, then this will often prompt them into paying.