News and Events

Extent of late payment revealed

26/03/2015

Almost a third of the time (31%) British businesses spend on credit control is spent chasing overdue debt, according to new research from Hilton-Baird Collection Services.

The Late Payment Survey questioned business owners and finance directors about their experiences with getting paid in 2014 and revealed the far-reaching impact of Britain’s late payment problem.

It showed that 30% of businesses now classify more than 10% of their debtor book as over 90 days old.

And, worryingly, the problem appears to be getting worse. The annual survey revealed that the average invoice is now paid 22.5 days beyond agreed credit terms - the longest recorded delay since the survey began in 2011.

As a direct result of these poor payment practices, almost one in three (30%) have had to increase borrowing, nearly one in five (19%) had to delay payments to HM Revenue & Customs, while one in ten admitted to turning away new business.

Commenting on the statistics, Alex Hilton-Baird, Managing Director of Hilton-Baird Collection Services, said: “It is deeply worrying how much of a financial impact late payment is continuing to have on businesses. It has been well documented how late payment is disturbing cash flow, but the effects run much deeper.

“That the average business now spends almost a third of its credit control resource chasing overdue debt just serves to illustrate how businesses are struggling to win the battle against late payment.

“The credit control process needs to start even before the order is placed, with robust account opening procedures and terms and conditions of sale, but not enough businesses have the resource to get the basics right, let alone manage the entire process. The older a debt becomes, the trickier it is to recover so even more time and resource has to be invested in securing payment, further increasing the burden.”

Another key focus of the survey was the range of credit management strategies businesses use to tackle the growing problem. And, encouragingly, 17% said they outsource all or part of their credit control function.

Alex Hilton-Baird continued: “It is difficult to stress enough how important it is for businesses to be using the right mix of credit management strategies in order to protect themselves from late payment as much as possible.

“Although it is good to see how much attention this issue is receiving, there is much debate regarding whether the government can, or even should, find the solution. In the meantime, the power to reduce its impact rests with businesses themselves and the actions they take.”

Download the full report here for an in-depth look at the findings, or click here for a more condensed summary.