Is paying late such a big deal? You bet.
With businesses still feeling the squeeze, it can be awfully tempting to miss an upcoming payment deadline to preserve your cash flow.
We know what it’s like: “What’s the harm in delaying payment to our supplier by a few days, right? Maybe we can get away with a week? I’m sure their accounts department won’t get on to us that quickly and besides, we’ve always paid them on time before.”
Unfortunately, the harm is proving great and it’s a big deal for businesses to be paid late. But it’s also a big deal for the businesses who don’t pay an invoice on time, whether it’s intentional or not.
Such is the cash flow situation at many companies currently, being paid on time is often more important than taking on a new order. Providing a service or selling goods on terms can take its toll on a business, and if payment is late then they will be faced with some serious concerns of their own.
For this reason, preserving your reputation is vitally important. Should your missed payment result in financial hardship for your supplier, will they be as receptive to your next order? And how long might it take to shake off that tag?
Plus, with late payment adding to other financial pressures, businesses are increasingly taking a firmer stance against late paying customers.
Many businesses are suspending work and services and suspending customer credit facilities.
Plus, businesses are increasingly using the Small Claims Court or registering County Court Judgments against customers; aside from the financial implications, these are things that will go on your business’s credit report for all to see.
And with damage to your credit rating, you make it harder for your business to buy things on credit.
If your business is struggling to meet its payment deadlines, there are a few more favourable steps you could take:
1. Talk to your customer
They’ll appreciate being made aware you might be struggling to meet a payment deadline. With enough notice they will be able to plan ahead and may be willing to grant a payment extension, particularly if you’ve been a reliable payer in the past. Communication is always key.
2. Speak to the bank
Would your bank be willing to provide or increase the size of your business’s overdraft temporarily? If you have a strong relationship with your lender, this could be a distinct possibility.
3. Seek additional funding
It’s always worth exploring the range of funding facilities on the market that specifically target increasing your business’s cash flow. Talking to a broker can help to identify areas of improvement and the most suitable facility that’s on the market.
If you’d like to improve your business’s cash flow to be able to make your payments on time, contact our team of funding consultants on 0800 9774833 to find out how we could help.