Late payment of invoices is one of the most significant issues facing small and medium business today. According to an analysis by accounting software provider Xero, around 52% of all invoices are paid late, leaving the average SME in the red by around £63,881.
The problem of late payments is also getting worse. According to Dun and Bradstreet’s research, 51% of the 500 companies they spoke to believed that the number of late payments had increased over the past three years.
Stagnant cash flow caused by unpaid invoices can have a significant negative impact on an SME. Nearly 30% of small businesses owners in the UK identify cash flow as their primary challenge, and 26% list it as the principal reason they have failed to pay their own suppliers on time.
This vicious circle also takes a personal toll on SME owners, with 51% of SME owners having to use personal savings to cover shortfalls caused by late payments. Around 26% of all small business owners report that they would have better physical and mental health if cashflow wasn’t such an issue.
New UK government reforms
In order to address the escalating problem of late payments, the UK Government has made significant reforms to the Prompt Payment Code (PPC).
The original Prompt Payment Code, which around 3000 large companies signed up to, obliged businesses to pay any company with less than 50 employees within 60-days of receiving an invoice.
Despite these measures, the government estimates that around £23.4 billion worth of late invoices have not been paid to SMEs in the UK. This vast sum of money significantly impacts both the cash flow and, ultimately, causes the closure of around 50,000 businesses every year.
To rectify this situation, the government has put more power in the hands of SME owners to charge interest on late payments.
The new PPC will make finance directors personally responsible for ensuring prompt payment.
How has the PPC changed?
As of the 1st of July 2021, Finance Directors or CEOs will personally sign the new Code, taking individual responsibility for making payments on time.
The payment period listed in the Code has also been slashed from 60-days to 30-days.
If payment is not made within those 30-days, small businesses can now charge interest on late invoices.
Signatories will now be provided with a logo to use on external communications to show their commitment to the PPC. By highlighting that a company is a signatory of the PPC, the company potentially damages their reputation if they don’t make prompt payments.
The government is also looking to beef up payment enforcement on behalf of small businesses. The new PPC will enable the Code’s administrators to investigate any breaches of its rules, based solely on third-party information.
Simultaneously, the government is looking to increase the powers of the Small Business Commissioner (SBC) to include legally binding payment orders, launching investigations and levying fines.
How does the new PPC affect your business?
Small businesses make up around 75% of the UK’s private sector employment and about 50% of its turnover. However, late payments are a significant impediment to SMEs’ greater investment or job creation.
The PPC provides small businesses owners with new tools to ensure prompt payment, such as personal responsibility from Finance Directors or CEO and the ability to charge interest on late payments.
Larger signatories to the PPC are now able to advertise that they are committed to making prompt payments to smaller businesses through the use of a specific logo, building their reputation for good business practice.
However, regulation is just one part of the battle against the problem of late payments. Chaser allows both Finance Directors who are signatories to the PPC and small business owners stay on top of credit control.
How does Chaser help Finance Directors?
Finance Directors and CEOs are now personally responsible for good payment practices under the PPC, so keeping track of invoices and paying them promptly is now a critical task.
Chaser’s new Payment Portal streamlines the payment process by collating all the essential information in one place. Through the dedicated summary page, you and your customers able to see, at a glance, how much is owed and what date the invoice was issued.
Having this information easily acceptable stops invoices getting lost in the shuffle, resulting in late payments and potential reputation damage to your business.
The Payment Portal also enables your customer to pay directly from the invoice. This cuts down on admin time and assists in the prompt payment of invoices.
Chaser offers multiple flexible payment options that are only one easy click away when it comes to making the payment. This helps your customers stay on top of the invoices they need to pay in a streamlined and straightforward way.
How does Chaser help SMEs?
As an SME ourselves, we know that your time is valuable. We also know that getting paid is sometimes unnecessarily hard.
Research by YunoJuno suggests that over 50% of all freelancers are paid late. A similar analysis by MarketInvoice found that 62% of invoices in the UK were paid late. However, the UK isn’t alone in placing the burden of unpaid invoices on small businesses.
The average amount of invoices paid late in the US was 71% while Europe averaged 73%.
Chasing these invoices requires time that SMEs could otherwise be spending on pitching and promoting their business. In fact, team hours spent on manual processes like invoice chasing have been voted by Finance Directors as the largest cost in SME payment processes.
Non-payment of these invoices impinges on small businesses’ ability to pay their staff, create new jobs, or invest in their own growth. So how can you claim back the time and money you are owed? Let Chaser handle your accounts receivable.
Automate your payment reminders without sounding like a robot
As a market leader in automated AR (accounts receivable) software, Chaser makes it quick and easy for you to stay in control of your invoicing. Our innovative software saves businesses, on average, fifteen hours a week by automating AR tasks like chasing late payments.
Automated does not have to mean robotic either. Our easily personalised system makes every email sound like its coming straight from you, without you having to write it.
In addition to freeing up your time and getting you the money you are owed, our focus in on maintaining your customer relationships. Our email templates contain everything you need to chase problem customers politely and professionally, without sacrificing the personal touch.
You can automate the whole chasing process through sophisticated email cadences that send escalating payments reminders without the need for oversight.
Our clients are paid an average of sixteen days sooner, and their outstanding invoices are reduced by up to 25%.
All your payment information in one place
Our Payment Portal benefits both you and your clients by putting all the information you need to receive payment in one place.
Sending an invoice reminder through our payment portal puts a payment link right on the email, streamlining the process to get you paid as quickly as possible.
Keeping track of your accounts receivable has never been easier through the use of your dedicated Payment Portal summary page. Both you and your customer can see what invoices are outstanding, when payment is due, and all other relevant information with one easy click.
With all this easy to access information at your fingertips, you can gain easy insight into your customers’ payment behaviours through interactive debtor reports.
Flexible payment options
Our Payment Portals offer multiple, flexible payment options to expedite your payment. There are no complex process or set-up fees to wrangle with, just a conveniently wide range of payment choices to offer your customers.
However, we at Chaser don’t believe that professional commercial debt recovery services have to be aggressive or unpleasant. We prioritise maintaining your customer relationships while recovering the money you are owed.
As an experienced and professional debt collection agency, we employ a proactive and sensitive approach that yields excellent results for all parties involved.
You can initiate our debt recovery process through your Chaser account and use that same account to monitor your collection’s progress.
Since our cost-effective collection services are separate to our credit control services, you can use our app to ask for a fair, transparent, no-win-no-fee pricing quote before choosing to escalate your debts.
Make prompt payments the new normal
Learn how to easily ensure prompt payments from your customers with accounts receivable automation in this webinar.