Feeling the squeeze of stretched payments
Small business owners are being forced to become unofficial credit providers by big players moving the payment goalposts...
The UK economy is hugely dependent on Small to Medium Enterprises (SMEs). According to the Department for Business and Regulatory Reform they represent 99.9% of all UK businesses, 51% of national turnover and employ nearly two thirds of all private sector workers.
But, it’s a buyers market at the moment and you might find the big hitters aren’t exactly playing fair. Many are using the recession to stretch payment terms, effectively using suppliers as a source of credit.
For example, Tesco has put extra pressure on local non-food suppliers telling them to expect payment in 60 days instead of 30. And Alliance Boots (whose brands include Boots and No.7) expect their suppliers to wait 105 days instead
of 45.
But what can you do if your business is feeling the squeeze? Well, for most of us stretched invoices come in the form of late payments rather than formally extended credit terms. In these cases, you can legally charge interest on any payments over your agreed terms. Until June 2009, the legal rate is 10%. The Better Payment Practice Campaign’s website www.payontime.co.uk gives some really useful information about your legal rights, as well as useful tips on other ways of getting your dues. But in the real world, most of us would steer clear of taking our clients to court for fear of losing business, especially in such difficult times.
That’s when invoice finance can be a real life-saver. By accessing funds against outstanding invoices regardless of payment terms, businesses can take control of their cash flow again. What’s more, using an independent and trusted broker like Cashflow UK can reassure you that you’ll be working with exactly the right invoice financier for your specific requirements and industry sector.
