New research shows that small firms can cut the wait for payments if they automate processes such as credit control, payments and receipts.
Late payments cost UK small businesses an estimated £250 billion every year. A recent report from Siemens Financial Services, Mind the Payment Gap, found that SMEs have more problems with late payments than larger companies.
Its data showed that businesses with an annual turnover of under £1 million wait on average 72 days for invoices to be paid; those with an annual turnover of between £1 million and £10 million wait on average 53-54 days.
"It's a tricky situation for small businesses," said Phil Sayers, ceo of online accounting software provider Clear Books. "The Government initiative to enable small businesses to charge interest and debt recovery costs on late payments was a nice idea, but as many small business owners will tell you, the reality is often quite different.
"Often the money outstanding is from a larger business and SMEs are often wary of risking damaging their relationship with a potentially important client. Your best defence is to make yourself as efficient as possible," advises Sayers.
According to data from Clear Books, small firms that automate their book-keeping using accounting apps get paid, on average, within 30 days - compared to the national average of 72 days for SMEs.
Phil Sayers said: "Businesses that are still using paper accounting or even simple spreadsheets should investigate the many automated options available on the market to help mitigate the occurrence and impact of late payment.
"We would urge accountants, for example, to highlight to their clients the importance of cash flow and encourage them to use software that automates it and makes the process more efficient. It can be difficult otherwise to identify when a payment is due or overdue let alone chase it, if all your records are being kept in a shoebox, on paper or even just on a spreadsheet."
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